Just before the Christmas holiday, A.P. Moeller Maersk, noted as the globe’s largest ocean container shipping firm, announced the intent too acquire Hong Kong based LF Logistics for the reported all cash sum of $3.6 billion.
Besides overshadowing this carrier’s takeover of carrier Hamburg Sued for $4 billion in 2017, this move further solidifies this carrier’s declared strategy to expand beyond ocean freight into varieties of inland logistics services.
For those unfamiliar, LF Logistics serves as the logistics services arm for Li &Fung Limited, providing customized, end-to-end supply chain and logistics services for global consumer brands and retailers, primarily in clothing apparel and low-cost consumer goods. Li & Fung’s most prominent customer is global retailer Walmart, which relies on the company’s one stop services for design, production sourcing, freight forwarding and retail store distribution of apparel merchandise needs.
LF Logistics reportedly employs upwards of 10,000 workers and controls a network of 223 distribution centers across Asia catering to the needs of over 250 global customers.
Maersk CEO Soren Skou indicated that this deal represents a big bet on Asia and it “means that we can also help our clients service the Asian market, which is where growth will be in the future.”
This latest move follows the acquisition of two different regionally based B2C E-Commerce logistics fulfillment companies, Visible Supply Chain Management (Visible SCM) and B2C Europe Holding B.V. (B2C Europe), in August of this year. Earlier this year, the carrier acquired Denmark based air freight services provider Senator International.
This latest acquisition is expected to close sometime in 2022.
According to reporting by Bloomberg, Maersk is paying a multiple of 14.4 based on enterprise value to EBIT. Temasek Holdings acquired a 22 percent equity stake in the logistics provider in 2019
Maersk’s declared strategy has been to expand its global business focused on two core capabilities, B2C fulfillment and B2C delivery based on a flexible technology backbone. Focus has been on the three largest E-Commerce regions, Europe, North America and Asia. The goal is to provide the carrier’s existing and future customers to sell and fulfill customer needs across multiple channels. Implied is the ability for shipping and beneficial customers to have total visibility of material and inventory movements across ocean, inter-modal and last-mile logistics fulfillment segments.
The acquisition reportedly excludes LF’s freight forwarding unit, which will remain with the owners. That reinforces the strategy of acquiring logistics assets and specialized technology.
This deal is in the shadow of the carrier’s achieved record profits derived from the explosive surge in freight rates this year. According to industry reports, Maersk is on track to report 2021 full year net income of $17 billion, six times the result achieved in 2020. In the light of such riches, the carrier announced that it is granting a $1,000 bonus to each of its upwards of 80,000 employees to reward a massive team effort.
Maersk’s ocean container shipping competitor Mediterranean Shipping Company also recently announced a $6.4 billion acquisition offer to acquire the Africa based logistics assets of French conglomerate Ballore to garner control of 16 terminals within Africa.
Additional Perspectives
As business and retail focused supply chain management teams enter a new year, they will face continuing transportation and logistics services disruptions brought about by continued waves of Covid-19 infections.
They will additionally face a changing global logistics landscape as ocean container carriers, flush with cash resources, continue their strategies to control more inter-modal and land-based services in 2022 and beyond.
Carriers were able to readily leverage their global capacity alliances to leverage higher freight, ancillary service and surcharge fees this year. Such leverage may increase in the future unless and until global based maritime regulators take a fresh look at the changing shipping and logistics services competitive landscape.
Bob Ferrari
© Copyright 2021, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
