SoftBank/AutoStore: a logical investment in logistics

SoftBank’s humanoid robot Pepper may be famous but it adds little to the group’s bottom line. Until now, chief executive Masayoshi Son’s interest in robot-enabled technology has not been his most profitable one. That may be about to change.

The Japanese tech group will take a 40 per cent stake in Norwegian warehouse-automation company AutoStore for $2.8bn. AutoStore, controlled by US private equity group Thomas H. Lee Partners, will be valued at $7.7bn, including debt.

The timing is apt. The pandemic-related growth in ecommerce has highlighted labour issues in the logistics industry that robots offer to resolve. The warehouse automation market is expected to grow to $30bn in the next five years, doubling from 2019, estimates research firm LogisticsIQ.

AutoStore’s robot warehouses allow vertical stacking too dangerous for humans to manoeuvre. It claims four times more inventory can be stored. That is especially useful in smaller warehouses used for fast delivery in central locations.

For SoftBank, the deal could restore some confidence that not every investment has an ultra-long horizon. AutoStore expects to become profitable this year. It already has more than 600 installations for clients including Gucci and Texas Instruments.

The further Son moves away from mega-bets on lossmaking gig economy start-ups, the less pressure will be exerted on SoftBank’s share price. Shares trade at a 2.3 price-to-book value, double last year’s multiple.

The snag is competition. AutoStore has multiple global competitors to contend with. Interest in automated warehouse tech has lifted shares of Japanese rival Daifuku 60 per cent in the past year. Honeywell Automation India has gained 70 per cent.

Alongside listed rivals are private companies such as Honeywell Intelligrated and Murata Machinery. AutoStore is also engaged in a long-running dispute with the UK’s Ocado over allegations of intellectual property theft.

Then there are SoftBank’s own investments in US warehouse robotics company Berkshire Grey and Indian logistics start-up Delhivery. The Japanese group’s focus on near-term profitability may be new, but its habit of investing in global companies racing for the same prize appears harder to break.

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