$10bn Blockbuster deals seek to transform shipping

The Christmas and the New Year period has seen no reduction in merger & acquisition activity in the logistics sector. The major shipping lines are in the vanguard as they expand their presence in other areas of logistics.

The largest has been Mediterranean Shipping Company’s (MSC) purchase of Bolloré’s African logistics business. Bollore Group confirmed on 21st December that MSC Group had agreed to “acquire 100% of Bolloré Africa Logistics, comprising all of the Bolloré Group’s transport and logistics activities in Africa, on the basis of an enterprise value, net of minority interests, of €5.7 billion”. Bolloré elaborated that “the Bolloré Group has granted the MSC Group an exclusivity until 31 March 2022 to enable the MSC Group, further to an additional due diligence phase and contractual negotiations, to submit a put option”.

It is reported that MSC competed strongly with CMA CGM to buy Bollore Logistics Africa, with CMA CGM already having expanded its CEVA forwarding and contract logistics in Africa as part of its ambitions to build a global ‘landside’ presence. That MSC was willing to pay what is a very respectable price for Bollore’s distinctive African business illustrates how keen shipping lines are to diversify their businesses. It also shows how much money they have at present.

What will happen to the rest of the Bollore Group is a good question. In the press release Bollore said that “The Group will also continue to develop its activities in numerous sectors such as communication, entertainment, telecoms, publishing…”. It may be possible that the rest of Bollore Logistics will be sold.

The other notable acquisition over Christmas has been the agreed offer by Maersk to buy LF Logistics. Formerly part of Hong Kong based Li & Fung, LF Logistics is particularly focused on supporting retail sectors such as clothing, but describes itself as “omni-channel” having developed fulfilment capabilities for e-retailing, although it does not provide last-mile capabilities. It has a presence through-out much of Asia-Pacific and has a forwarding business for the region.  The price agreed is US$3.6bn which represents a price-to-earnings ratio of approximately 14.4.

Vincent Clerc, CEO of the Ocean & Logistics business at Maersk said that the purchase will “boost our warehousing and distribution offering and respond to the rapidly growing needs of our customers for contract logistics”, providing “a unique position we can use to build and operate fulfilment to customers across our network”. Overall, the move was described by Maersk’s CEO, Soren Skou, as being a “milestone on our journey to become the global integrator of container logistics; a global logistics company that provide digitally enabled end-to-end logistics solutions based on control of critical assets. With the acquisition of LF Logistics, we add critical capabilities in Asia Pacific to support our customers long term growth in Asia Pacific as well as capabilities and technology we can scale in our contract logistics business globally”.

Both purchases not only betray the profits that the shipping lines have made over the past year or more but also the apparent desire of the whole sector to develop their businesses beyond marine freight transport. The largest of the shipping lines and container terminal operators are now assembling businesses that will make them significant global logistics service providers.

Source: Transport Intelligence, 4th January 2022

Author: Thomas Cullen