Danish forwarder DSV Panalpina has added Agility’s Global Integrated Logistics (GIL) division to its growing list of major acquisitions. News broke early on Tuesday (27-Apr) that Agility’s €3.5bn GIL division, which houses the forwarder’s air and sea operations, would be acquired by DSV Panalpina in an all-share deal valued at $4.2bn/€3.7bn. The deal will be funded through the issue of 19.3m new shares in DSV and it values Agility’s logistics unit at a multiple of 23.3 times earnings before interest and tax in the past 12 months. The deal is expected to close in Q3 2021 and comes just two years after DSV’s last major acquisition, the Swiss forwarder Panalpina.
Speaking of the latest acquisition, Ti CEO, John Manners-Bell, said “Further consolidation in the freight forwarding market is hardly unexpected and the purchase of Agility Integrated Logistics by DSV Panalpina must be put in the context of two decades of intense acquisition activity. Agility itself has been made up of over 40 deals as forwarders pursue strategies that allow them to build strength and depth on a worldwide basis, not least giving them buying power over shipping and airlines. Although acquisitions are never straightforward, DSV’s management has shown time and again that they have discovered the formula to integrate and even turn around the most challenged of companies. I expect the same in this case, as DSV becomes an even bigger rival to DHL Global Forwarding and Kuehne + Nagel on many key trade routes and sectors.”
At the end of 2020, Air & Sea operations accounted for 62% of DSV Panalpina’s total revenues. In 2018, the last year before Panalpina was integrated, Air & Sea accounted for a significant but smaller 45% of overall DSV revenue. Within GIL, forwarding and project logistics activities account for 84% of revenue, with contract logistics making up the remaining 16%.
Within Agility more widely, GIL is some 75% of all revenue, making it immediately clear that the Agility which remains will be a much-changed business. Focussed on the development activities of its Infrastructure division, what’s left at Agility will be much smaller although much more profitable – at €291m, Infrastructure had EBITDA 1.53x higher than GIL’s €190m.
Agility’s Vice Chairman, Tarek Sultan, said of the deal, “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” and added, “Agility will be exploring opportunities between DSV and its other businesses, with promising areas of future cooperation potentially including Agility’s Logistics Parks business, Shipa group of companies, and technology ventures. Agility will remain an emerging markets leader, investor in emerging technologies, and champion of sustainable business.”
With the global forwarding industry on a path to ever-increasing digitalisation, it is perhaps significant that Shipa, Agility’s digital offering, is seemingly separated from the deal at this stage. It appears DSV Panalpina’s offering, myDSV, remains the notional digital forwarding offer from the new combination in the immediate term.
Effects on the market – a new global forwarding leader
Using 2020’s results as a guide, it’s clear a further boost to the scale of DSV Panalpina’s Air & Sea operations is imminent. Ti calculations show the combination of DSV Panalpina’s Air & Sea divisions with the Forwarding & Project Forwarding revenues of GIL would result in a €12.6bn business. It’s unlikely that the new DSV Panalpina/Agility combination will retain all business and, as 2020 clearly showed, much can happen in the forwarding market over the course of a year, but a straightforward 2020 revenue projection, the deal would see DSV Panalpina rank as the largest global forwarder by revenue.
As for volumes, DSV Panalpina’s announcement states the acquisition “will consolidate [DSV’s Panalpina’s] 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.” Volumes of that order would make the new DSV Panalpina/GIL combination a sea forwarder similar in scale to DHL GFF (2.862m TEU in 2020) and an air forwarder of similar size to K+N’s operation (1.64m tonnes in 2020). According to Ti calculations, DSV Panalpina/GIL would sit comfortably in the top 3 global forwarders by volume for both air and sea freight.
As the new largest global forwarder by revenue, it seems certain that DSV Panalpina will again push change in the global forwarding market.
Thomas Cullen, Ti’s Senior Analyst, commented “The acquisition is hardly a surprise bearing in mind the strength of DSV’s balance sheet and the growth trajectory of the company. Nor is the rationale surprising, with part of the logic of the Panalpina purchase being the geographical diversification of DSV’s markets, buying Agility’s GIL offers exposure to a number of otherwise difficult to access markets in regions such as the Middle East and Africa. In that respect it is not so different from UTi in 2016.” Cullen went on to add, “the only slight note is the absence of exposure to e-retail. This is becoming an increasingly vital part of both forwarding and contract logistics. It might be suggested that this will be DSV’s next target.”
Source: Transport Intelligence, April 27, 2021
Author: Transport Intelligence