As noted by the CEO of Ti, mergers and acquisitions activity in the global logistics industry is set to take off for a number of reasons. One such activity is currently underway.
The potential sale of APL Logistics has been rumoured for some time and according to Bloomberg, its parent company, Neptune Orient Lines (NOL) confirmed it by inviting offers for its logistics subsidiary. It now appears the list of prospective acquirers has been whittled down to three – the investment firm KKR & Company, CJ Korea Express and XPO Logistics.
APL Logistics will certainly benefit all three suitors. Over 60% of APL’s logistics’ revenue is from the Americas, 28% from Asia and the Middle East and the remainder from Europe. This revenue split will result in an opportunity for global expansion for both CJ Korea Express and XPO Logistics.
Along with global expansion opportunities for the suitors, APL Logistics’ strengths also include a significant presence in China and India, its ability to create high volume intermodal logistics solutions and an existing client base that includes large US shippers. Within the US, much of its revenue is derived from the automotive industry.
However, based on analysis obtained from Ti’s GSCi portal, examples of weaknesses are its lack of exposure to high growth sectors such as high tech and pharmaceutical, lack of exposure to major consumer goods & retail markets in Europe and underutilized global capacity and network coverage.
Why the sale? Like many shipping liners, NOL has struggled against a sea freight environment of too much capacity and volatile rates. As such, the need to raise cash is necessary. NOL is certainly not alone. Other ocean liners such as China Cosco, Hanjin and Hyundai have sold off their logistics arms as well. According to Alphaliner, synergies were not achieved between the two entities.
Moving forward, NOL anticipates $1bn for APL Logistics and according to Bloomberg has requested final offers by January. While the financial gains from a sale will be welcomed by the company, losing 18% of its revenue may impact the company even more over the long run.
For more information on M&A activity you can register your interest in Ti’s upcoming European Mergers & Acquisitions report, due for publication on December 16, by clicking here.
