Shopify to Acquire 6 River Systems for $450 Million

Credit: 6 River Systems

September 10, 2019      

Shopify Inc. announced this week it has reached an agreement to acquire 6 River Systems, which creates warehouse fulfillment robots and software. Under the terms of the agreement, Shopify will acquire all of 6 River Systems’ outstanding securities for $450 million (60% cash, 40% in Shopify voting shares). The acquisition is expected to close in Q4 2019, the companies said in a statement.

Shopify assists merchants with multi-channels sales operations. Image: Shopify

In June, Shopify introduced its Shopify Fulfillment Network, which aims to ensure timely deliveries, lower shipping costs, and provide a “superb customer experience for merchants and their customers. The company said the acquisition would be a critical step to accelerate its growth, while 6 River Systems will continue to build and sell its solution for warehouses.

With the acquisition, Shopify said it will add a team with “decades of experience in fulfillment software and robotics, including experienced leaders from Kiva Systems (now Amazon Robotics). Adding the 6 River platform of cloud-based software and its collaborative mobile robots known as “Chuck” to the Shopify Fulfillment Network will increase the speed and reliability of warehouse operations, by empowering on-site associates with daily tasks, including inventory replenishment, picking, sorting, and packing.

Shopify Tobi Lutke

Tobi Lütke, Shopify

“Shopify is taking on fulfillment the same way we’ve approached other commerce challenges, by bringing together the best technology to help everyone compete,” said Tobi Lütke, CEO of Shopify. “With 6 River Systems, we will bring technology and operational efficiencies to companies of all sizes around the world.”

“By joining Shopify, we’re changing the game of fulfillment. Together, we will help thousands of businesses improve their fulfillment operations, with an easy-to-learn solution that can more than double productivity and improve accuracy,” said Jerome Dubois, co-CEO and co-founder of 6 River Systems.

Interact Analysis, which recently completed its 2019 analysis of the order fulfillment robotics market, said 6 River Systems was poised for rapid growth of its person-to-goods robotics system. The research firm said it expected 6 River to grow its installed base of robots from about 200 at the end of 2018 to more than 1,000 this year.

Ash Sharma Interact Analysis

Ash Sharma, Interact Analysis

“While the acquisition itself and Shopify’s strategy with robotics is not so surprising, the $450 million price paid for 6 River Systems – particularly as $270 million will be paid in cash — may raise a few eyebrows,” said Ash Sharma, research director at Interact Analysis. “The price tag is 60 times multiple of 6 River Systems’ 2018 revenues, according to our estimates and nearly 20 times what we predict it will generate in 2019.” He added it should be noted that the company’s revenues are set to grow at exponential rates, as it has attracted many customers in the second half of 2018 and 2019, most of which are installing large numbers of its Chuck robots.

Sharma said the acquisition may surprise some in the space, given the early stage that the company was at. “However, we saw a similar picture with Canvas Technology being acquired earlier this year by Amazon when it had barely been commercially shipping a product,” said Sharma. “What this highlights is that the supplier landscape for logistics robots will continue to consolidate (and also attract investment) due to the vast number of vendors active, the massive (and long-term) growth the industry is enjoying, and the rapid pace at which companies now need to act due to the speed of change driven by ecommerce and giants such as Amazon disrupting their industries.”

Included in the transaction are Shopify Class A shares and options, valued at approximately $69 million, which will be issued to 6 River Systems’ founders and employees that will vest subject to certain conditions, and will be treated as stock-based compensation, Shopify said. The company said the transaction is expected to increase Shopify’s 2019 expenses by approximately $25 million, including $10 million in operating expenses; $8 million in amortization of intangibles resulting from purchase accounting; and $7 million in stock-based compensation. In addition, 6 River Systems is expected to generate annual billings of approximately $30 million in 2020, with associated revenue recognized over the multi-year lifetime of each contract.

6 River Systems, an RBR50 2019 honoree, was founded in 2015 by Dubois, Rylan Hamilton, and Christopher Cacioppo. Both Hamilton and Dubois came from Kiva Systems, which was acquired by Amazon in 2012. The company had raised $46 million in three funding rounds from 2016 through 2018, the last round consisting of $25 million in Series B funding in January 2018.

In recent months, the company announced a new mobile sorting system, and a partnership with Soft Robotics for a mobile picking system, to go along with its Chuck robots and management software. Last year, the company announced its robots had filled more than 1 million units during the Black Friday and Cyber Monday sales periods. Prominent customers of 6 River Systems include Lockheed Martin, CSAT Solutions, ACT Fulfillment, DHL, XPO Logistics, and Office Depot.

Shopify develops a multi-channel commerce platform, which allows merchants to design, set up and manage stores across multiple sales channels, including mobile, web, social media, marketplaces, brick-and-mortar locations, and pop-up shops. The platform also provides merchants with a back-office and single view of their business, from payments to shipping. Headquartered in Ottawa, Canada, Shopify currently powers more than 800,000 businesses in about 175 countries, and includes customers such as Unilever, Kylie Cosmetics, Allbirds, and MVMT.