Maersk’s proposed $3.6bn acquisition of Hong Kong-based LF Logistics represents a “significant milestone” in its transformation into a global integrator of container logistics, according to the CEO of its Ocean & Logistics division, Vincent Clerc.
Maersk will purchase LF Logistics from controlling shareholder Li & Fung and Singapore state-owned investment vehicle Temasek, which acquired 22% in 2019.
The $3.6bn, in cash, being paid by Maersk is more than double the company’s valuation at the time of the Temasek deal.
LF Logistics employs 10,000 people in 14 Asian countries and operates a network of 223 warehouses across the continent. It reported revenue of $1.3bn in 2020 for an ebitda of $235m, and is expected to see earnings increase to about $250m this year.
As part of the agreement to acquire LF Logistics, Maersk said it would enter a “strategic partnership” with Li & Fung to develop logistics solutions, aiming to more than double the turnover and operating profit of the logistics unit by 2026.
Maersk CEO Soren Skou said: “With the acquisition of LF Logistics, we add critical capabilities in Asia Pacific to support our customers’ long-term growth, as well as capabilities and technology we can scale in our contract logistics business globally.”
CEO of LF Logistics, and its parent Li & Fung, Joseph Phi said Maersk provided “the ideal fit for our people and our customers”, adding that achieving scale was “of paramount importance” in its ambition to be a global leader in the logistics sector.
“[Maersk] has a substantial presence around the world and will utilise LF Logistics’ talent base and operational platform across Asia to build out its logistics and fulfilment offering globally. This is testament to the strength of our team, our unique operations-centric culture and superb growth potential,” said Mr Phi.
According to Maersk’s regional MD for Asia Pacific, Ditlev Blicher, the addition of the LF Logistics’ omnichannel fulfilment capabilities would “help to close the loop” in its current offering, “enabling fully integrated supply chains for our customers”.
Mr Clerc said that LF Logistics was “close to being the gold standard” in contract logistics and the purchase was “the most important step we have taken yet” in its mergers and acquisitions in the sector.
But one executive at a large forwarder told The Loadstar: “I think Maersk has its strategy wrong. I struggle to make sense of it. Will they be able to integrate?”
As part of the deal, Maersk has agreed a $160m earn-out provision to the sellers and key staff, based on the future financial performance of the company.
Meanwhile, Maersk’s insatiable appetite for logistics acquisitions, in its aspiration to become the ‘new Amazon’ of shipping, is bad news for small to mid-sized freight forwarders.
From 1 January, the forwarders and NVOCCs will no longer be offered ‘named account’ short-term contracts, instead they will be left to scramble for space on each sailing with the Danish line and its Hamburg Süd subsidiary via the volatile spot market.
Subject to regulatory approval, the LF Logistics transaction is expected to close next year.