DSV Panalpina to acquire Agility’s Global Integrated Logistics business
Serially acquisitive Danish freight transport and logistics company DSV Panalpina today announced another major acquisition in the form of Agility Global Integrated Logistics – the global logistics division of Agility Public Warehousing Company (Agility) – in a deal valued at US$4.2 billion.
DSV Panalpina’s acquisition of Agility’s Global Integrated Logistics (GIL) will create the world’s third-largest transport and logistics company by 2020 revenue with a combined pro forma revenue of approximately DKK 142 billion (around US$22 billion) – an increase of around 23% – creating a combined company with a workforce of more than 70,000 employees with own operations in more than 90 countries. With a market share of around 3% DSV Panalpina currently ranks fifth behind DHL Logistics, Kuehne + Nagel, DB Schenker and Nippon Express, but the combination with GIL will increase its global market share to an estimated 4-5%.
It will be an all-share transaction expected to close in the third quarter of 2021, with Agility set to own approximately 8% of all post-transaction outstanding shares of DSV – which will make Agility DSV’s the second-largest shareholder based on today’s shareholder register.
Agility approach to DSV
DSV Panalpina confirmed to Lloyd’s Loading List that Agility had approached DSV Panalpina with the proposal, on the basis that the deal would be an all-share transaction rather than a cash deal. Jens Bjørn Andersen, group CEO of DSV Panalpina, said that some might argue that a cash transaction might be preferable in some ways, but that was not the deal that was available. And DSV Panalpina CFO Jens Lund told Lloyd’s Loading List that even if such a transaction had been available on a cash basis, it would have been at a higher price.
The deal comes just two years after DSV’s US$5.5 billion acquisition of Switzerland-based Panalpina, with merger and acquisition (M&A) “a well-known part of DSV Panalpina’s long-term strategy”. DSV Panalpina said the company “has demonstrated its ability many times in both acquiring and successfully integrating companies with similar business models as DSV Panalpina”, confirming that the value of the GIL acquisition is US$4.2 billion (DKK 26 billion).
GIL achieved US$4 billion in revenue in 2020, with its air and sea freight activities making up around 80% of its business, with 10% in road freight and 11% in contract logistics. It has a workforce of approximately 17,000 in-house employees, plus around 2,000 agency staff.
The acquisition does not include Agility’s Logistics Parks business, which develops and operates warehousing and light industrial parks across the Middle East, Africa and Asia – nor Agility’s other subsidiary companies, which offer fuel logistics, airport services, commercial real estate and facilities management, customer digitisation, and remote infrastructure services.
Increased competitiveness
DSV Panalpina said its largest division Air & Sea, “will be substantially strengthened” with the acquisition of GIL “and will consolidate the rank among the largest providers globally with close to 2.8 million containers (TEUs) and more than 1.6 million tonnes of air freight transported annually”. It said GIL’s contract logistics capabilities, “which are increasingly important due to complex supply chains and changing distribution channels”, will strengthen DSV’s Solutions division with GIL’s additional warehousing capacity of more than 1.4 million square metres, mainly in APAC and the Middle East.
GIL will also add road freight activities to DSV’s network in both Europe and the Middle East “and thereby increase DSV’s competitiveness across all three divisions”, with GIL’s currently loss-making European road freight activities more viable within an organisation with greater scale
Company synergies
Jens Bjørn Andersen, Group CEO of DSV Panalpina, said DSV and GIL were “an excellent match”, with valuable synergies as a result of similarities in both business models, services and strategies. He stressed that there were “many good reasons to join forces with the Middle Eastern transport and logistics provider”, noting:“GIL’s strong market position in APAC and the Middle East complements DSV’s network well and will support our long-term value creation ambitions. The combination of our two global networks will provide us with the opportunity to offer our customers an even higher service level.
“Our two groups already share a culture of entrepreneurship and local ownership, and we look forward to welcoming GIL’s talented staff to DSV.”
DSV highlighted that it “has proven successful in both acquiring and integrating companies”, most recently Panalpina in 2019 and UTi Worldwide in 2015. It said the “focus on scalability remains one of the key competitive advantages in freight forwarding with significant operational and commercial benefits in a highly fragmented market”.
DSV highlighted “many potential synergies as a result of similarities in business models, services and strategies”, including: strong customer relationships and vertical expertise; commercial synergies and cross-selling opportunities from stronger network and service offerings, new competencies and skills; consolidation of operations, administration and logistics facilities; consolidation of IT infrastructure; and a strong focus on corporate responsibility and sustainability.
New milestone
Tarek Sultan, vice-chairman of Agility, commented: “This deal creates significant shareholder value and marks a new milestone in Agility’s journey. Agility remains committed to the supply chain industry and will become the second largest shareholder in one of the fastest growing and most profitable logistics companies in the world.
“I want to thank GIL’s leadership and employees for profitably growing the company and steering it through one of the most challenging periods the industry has ever seen during the global pandemic. Agility is proud of what GIL has achieved.”
Future potential cooperation
Sultan said Agility will also be exploring opportunities between DSV and its other businesses, “with promising areas of future cooperation potentially including Agility’s Logistics Parks business, its Shipa group of companies and technology ventures. Agility will remain an emerging markets leader, investor in emerging technologies and champion of sustainable and responsible business.”
DSV said the transaction was “expected to be EPS (earnings per-share) accretive in year 2 after completion of the transaction, and it is DSV’s aspiration to lift the operating margin of the combined entity to DSV’s existing levels within the respective business areas”.
Following completion of the transaction, DSV said further details on the impact of the acquisition will be communicated, including estimates and timing of synergies and integration costs as well as an update on the financial outlook for 2021.
Although DSV Panalpina said it did not wish to discuss potential job restructuring and losses resulting from the transaction, Lund told Lloyd’s Loading List that productivity was a key factor in creating a long-term, sustainable business that would support the jobs of employees into the future.
Conditions and approvals
DSV Panalpina and GIL expect to close the transaction in the third quarter of 2021, provided conditions are met and necessary approvals are obtained. Until then, DSV Panalpina and GIL will continue to operate separately and independently.