Once again, there is another mega acquisition within the transport and logistics industry. Last week, Denmark based DSV, currently ranked the sixth largest global logistics provider, agreed to acquire U.S. based UTi Worldwide for $1.35 billion. Previous acquisitions announcements involve U.S. providers acquiring European based firms, but this time, the tables are turned. For instance,
For DSV, UTi will be in biggest acquisition challenge, and when consummated, could increase DSV’s revenues by nearly 50 percent. The cash offer of $7.10 per-share represents a 34 percent premium over the 30 day volume-weighted average closing price of UTi shares. However, DSV has struggled of late with profitability, disappointing equity markets with its second-quarter financial results in September. The board of directors of UTi has already unanimously approved the agreement, but the agreement is still subject to approval by UTi shareholders.
According to business media reports, the combined companies will have geographic service presence in Asia, Africa, the Americas, Europe and the Middle East. The deal is further conditional on receiving regulatory approval and customary closing conditions and is expected to close in the first quarter of 2016.
This latest acquisition comes in the wake of the recent announcement by XPO Logistics in its intent to acquire Con-way Inc. for an estimated $3 billion, FedEx’s earlier acquisition of GENCO and Bongo International, and in its current intent for acquiring Europe based TNT Express. Earlier this year, UPS acquired freight broker Coyote Logistics.
At a recent transportation industry conference, FedEx Chairmen and CEO Fred Smith predicted even more acquisitions, attributing the current trend to slower growth prospects for the logistics and transportation sector. Smith further predicted more technological advances for the industry, which is another motivation for the current wave of consolidation.
With each major announcement, the impetus increases for other major logistics and transportation providers to seek acquisition moves to either lock-up capacity, geography services coverage or industry concentration. As Supply Chain Matters has previously opined, Industry supply chain leaders are already highly concerned with growing transportation costs, and now need to be even more watchful and diligent to the implications of these moves, especially if your current logistics provider is involved. Already, FedEx is receiving pushback from EU regulatory agencies to divest of certain TNT assets to make its acquisition deal work. UPS faced similar pressures on its prior, ill-fated attempt to acquire TNT. The problem this time is finding viable available European logistics providers to assume control of divested assets.
The landscape of global logistics and transportation services providers will continue to undergo significant changes in the coming months, With upwards of $4 billion already in play, the pressure for deal making will intensify as financing remains cheap. Industry supply chain teams need to stay aware of the many implications in relation to added services, technology and/or costs.
Such activity is not just limited to logistics services. Ocean container shipping continues ripe for consolidation. The large industry players are squeezing out smaller players.
If contract renewals are due, it is wise to include clauses that address the event of an acquisition or sale, and its impact on continued services and costs.