Wednesday, December 22, 2021

Another Container Shipping Giant Continues the Expansion Trend

End to End logistics is the Target of the Big Boys
Shipping News Feature

DENMARK – HONG KONG – And so it continues. The determination of the big container shipping lines to extend their influence along the supply chain and up to the end customer's front door took yet another step this week as A P Moller Maersk acquired 100% of Hong Kong based L F Logistics.

The deal is said by Maersk to be worth an enterprise value of US$3.6 billion (enterprise value includes in its calculation the market capitalisation of a company but also short-term and long-term debt as well as any cash on the company's balance sheet). In addition, an earn-out with a total value of up to $160 million related to future financial performance has been agreed as part of the transaction.

Founded in 1999 LF Logistics is privately owned by Li & Fung (78.3%) and Temasek Holdings (21.7%). LF Logistics is organised through two business units: In-Country Logistics (ICL) and Global Freight Management (GFM). The company employs circa 10,000 staff based around 223 warehouses and fulfilment centres in 14 countries totalling 2.7 million m2 and specialises in B2B and B2C distribution solutions within retail, wholesale, and e-commerce.

In the full-year 2020 LF Logistics reported a revenue of around $1.3 billion and a post-IFRS 16 adjusted EBITDA of around $235 million, with the ICL business generating a revenue of around $850 million and a post-IFRS 16 adjusted EBITDA of around $230 million. For the full-year 2021 the ICL business is expected to report a revenue around $1 billion with an adjusted post-IFRS 16 EBITDA around $250 million.

This is a massive deal by any standards and with it Maersk obviously intends to make its mark in the online fulfilment sector across Asia, seen as the next big market for growth in e commerce. As part of the agreement to acquire LF Logistics, Maersk will enter a strategic partnership with Li & Fung to develop logistics solutions. The newly acquired company operates an extensive Pan-Asian network and claims to be the supply chain partner of choice for businesses looking to grow in the Asia-Pacific region. Joseph Phi, CEO of Li & Fung and CEO of LF Logistics commented:

“We recognise that for LF Logistics to be a global leader in the industry, achieving scale is of paramount importance. Maersk provides the ideal fit for our people and our customers. It 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. Together we will deliver a compelling value proposition that allows our people to attain their full potential and our customers to achieve sustainable competitive advantage.”

Maersk says that its new acquisition’s Asia-Pacific wide footprint and industry leading fulfilment capabilities, matches the Danish giant’s own strategic intent to support customers’ supply chain needs end-to-end, prompting Soren Skou, CEO of Maersk to say:

“The acquisition of LF Logistics is an important and truly strategic milestone on our journey to become the global integrator of container logistics; a global logistics company that provide digitally enabled end-to-end logistics solutions based on control of critical assets. With the acquisition of LF Logistics, we add critical capabilities in Asia Pacific to support our customers’ long term growth in Asia Pacific as well as capabilities and technology we can scale in our contract logistics business globally.”

The purchase is subject to all the usual regulatory agreements and expected to close in 2022. Maersk will also enter a strategic partnership with Li & Fung to develop logistic solutions. Further, the parent company of Li & Fung is expected to retain and continue to build the carved-out GFM business following completion of the transaction The warehousing assets of Maersk now total 549 sites globally of 9.5 million m2. Vincent Clerc, CEO of Ocean & Logistics at Maersk concluded:

“With this move, we will boost our warehousing and distribution offering and respond to the rapidly growing needs of our customers for contract logistics. Guided by a customer-centric culture and well-executed operations, LF Logistics has built an unparalleled track record of executing a superior omni-channel strategy for customers, which is a unique position we can use to build and operate fulfilment to customers across our network.”