The boom in shipping line profitability is permitting shipping companies to both expand and rebuild. The latest example is CMA CGM’s re-purchase of Fenix Marine Services, which owns the third-largest container terminal in the Port of Los Angeles.
For CMA CGM this move represents rebuilding, as the Marseilles-based container line formerly owned the complex prior to its sale in 2017, a sale effectively forced by the financial stress of a difficult market environment and the cost of the purchase of rival shipping line NOL. The deal resulted in the purchase by the infrastructure fund EQT of 90% of the equity of the terminal, a business at that time valued at US$875m. The deal announced on November 3rd 2021 will lead to CMA CGM buying back that 90% equity for what is described by both parties as an “enterprise value of US$2.3 billion”. Clearly, this has been a successful investment for EQT.
EQT states that it had invested heavily in the terminal complex, including building the “the largest cranes in North America….an extensive yard reconfiguration that increased terminal capacity by 40 per cent…the installation of automated gates and implementation of advanced inventory tracking systems, as well as the launch of innovative machine learning technology to optimize terminal operations”.
The acquisition of Fenix is clearly important for CMA CGM, important enough to warrant such a price premium. The company in its statement around the purchase emphasises the centrality of the trans-pacific trades to its overall business in container shipping and calls to Los Angeles are a key part of this. CMA CGM also asserts that its terminals business is core to the wider group, already being “a global port terminal operator” with “investments in 49 port terminals in 27 countries, through its two subsidiaries CMA Terminals and Terminal Link (joint venture).”
However, the company also emphasises that the purchase “is consistent with the CMA CGM Group’s strategy of developing its terminal business while supporting the growth and efficiency of its shipping lines, and increasing service quality for its clients, in a context that requires a comprehensive approach to the supply chain.” In other words, it also intends to use Fenix as a platform for the development of its inland logistics capabilities.
Source: Transport Intelligence. 04 November 2021
Author: Thomas Cullen