XPO Logistics completes purchase ahead of new company launch

XPO Logistics

In what will be an eventful year for the company, XPO Logistics completed on Monday, January 4, the acquisition of Kuehne + Nagel’s British operations. The deal, which was announced last year will, according to XPO, expand “XPO’s contract logistics network in the UK and Ireland to 248 locations and approximately 26,000 employees. The acquired operations provide a range of logistics services, including inbound and outbound distribution, reverse logistics management and inventory management, primarily in the beverage, technology and e-commerce, and food service verticals.”

Essentially what has happened is that the old Hays Logistics business, that K+N bought in 2005, is being merged with the TDG businesses that Nobert Dentressangle and later XPO bought in 2010. This will reduce competition in the UK market and offer economies of scale to XPO.

The value of the deal is unknown.

For several years Kuehne + Nagel has struggled with the profitability of its contract logistics division. It has disposed of some other assets in France and Argentina and, according to Dr Joerg Wolle, Chairman of K+N, “the business unit is now well-positioned to concentrate on scalable solutions worldwide, particularly in the e-commerce and pharmaceutical sectors.” It is interesting that he cites pharmaceuticals and e-commerce. K+N is a significant player in the automotive sector, yet this seems not to get a mention.

As for XPO Logistics, it may have strengthened its market position in the UK but will transform its strategic position later this year by splitting into two separate companies. The contract logistics business will become ‘NewCo’, which will include both the North American and European businesses. This business will be sizeable, with XPO Logistics claiming that it will be the “second-largest contract logistics provider in the world”.

What the trajectory of this ‘NewCo’ will be is unclear. It could continue to acquire contract logistics businesses, although it would seem unnecessary bearing in mind the size of the new company. What it does represent is a consolidation of the contract logistics sector, implying in less choice and possibly higher prices for customers. 

Source: Transport Intelligence, January 5, 2021

Author: Thomas Cullen