Danish transport and logistics group DSV Panalpina has acquired Global Integrated Logistics (GIL) from Kuwait’s Agility for $4.2 billion.
As soon as the acquisition was announced, Panalpina’s share rose by 8.3%.
This deal is one of several deals in which global logistics companies in recent years seek to build large entities in the fragmented cargo transportation market.
After the deal, DSV would overtake DB Schenker, putting it behind only DHL Logistics and Kuehne & Nagel as measured by revenue and freight volumes.
“This is very positive news and exactly what has been at the top of investors’ wish list,” said Mikkel Emil Jensen, analyst at Sydbank.
“And it’s exactly what DSV want more of, and where they are strongest in terms of earnings, so there is an opportunity to create really good synergies,” he added.
Agility’s logistics unit has around 17,000 employees and had revenue of $4 billion last year.
DSV’s Chief Financial Officer Jens Lund told Reuters in an interview that the unit is “an excellent match” and that he expects to lift profitability at the Agility unit from a current operating margin of 3.5-4% to DSV’s margin of around 10%. He declined to elaborate on how much synergy the acquisition will create.
“This will give us good exposure in Asia-Pacific and the Middle East,” Lund said.
The acquisition will increase DSV’s freight volumes by around a quarter and give it an extra 5% in global market share, according to Lund.
“This industry is still very fragmented,” he said.
Acquisition and growth
Panalpina is adopting a growth strategy through acquisitions, and less than two years ago, it bought the Swiss logistics services group Panalpina for about $6 billion.
Under the Agility deal, DSV Panalpina will transfer 19.3 million new shares worth 1 Danish crown each to Agility, representing around 8% of its shares, making the Kuwait company the second largest shareholder in DSV.
Panalpina expects the Agility unit to be fully integrated around a year after the transaction closes in the third quarter.
The company also reported first-quarter operating profit above expectations on Tuesday and raised its expectations for full-year profit.
2.70 billion expected by analysts for the January-March quarter in a poll gathered by the company, Panalpina’s operating profit before special items stood at 3.07 billion crowns, topping the.
DSV raised its forecast for annual operating profit before special items to 11.25 billion-12.0 billion crowns from 10.5 billion-11.5 billion.