DSV is still keen on acquisitions

CEO Jens Bjørn Andersen tells analysts consolidation makes sense in an “extremely fragmented” 3PL industry.    DSV still believes that further consolidation in the logistics business is a good idea, though two recent acquisition targets have spurned its recent overtures.
   During a call with securities analysts Thursday in which the company reported record earnings, Jens Bjørn Andersen, DSV’s chief executive officer, said even though the largest shareholder of Panalpina turned down a DSV offer earlier this week and CEVA rejected a DSV overture in October in favor of a closer relationship with CMA CGM, “We have the very clear understanding an opinion that in this extremely fragmented industry where the biggest players have only a fraction of the market consolidation makes a lot of sense.
   “We have created value for stakeholders every time we built a bigger company at the time we have acquired one of our competitors. We create value for our shareholders, employees and also for customers. We simply build a better product offering for the market than what we had. Today we are much stronger than if we had not done the acquisitions,” said Andersen (pictured above).
   Andersen said “the biggest market players in the industry have a market share of 2 or 3 percent and the 20 largest of 30 to 35 percent. Other industries have one market leader with a similar share.”
   DSV reported profit for 2018 was 3.99 billion Danish kone (DKK) or about $607 million for the year, a 32 percent increase over 2017. Revenue was 79.1 billion DKK, an 8.1 percent increase.
   In the fourth quarter, DKK’s profit was 928 million DKK, a 19.7 percent increase over the same period last year; revenue was nearly 21 billion DKK, a 10.6 percent increase.
    Andersen said the results were the greatest of all time for DSV.
    He said during the analyst call that DSV’s proposal to acquire Panalpina was a “substantial step forward for us” and would have been DSV’s largest acquisition by far.
   Andersen said, “At this moment in time, we have no further comment on the offer. I repeat, we have no further comment.”
   On Sunday, Panalpina announced that the Ernst Göhner Foundation, which owns 46 percent of Panalpina shares, did not support a bid DSV made in January to acquire Panalpina.
   But Reuters reported later Thursday that Andersen told it,  “We are fully focused on going through with this transaction now” and “if we had considered the case closed, we should have issued a stock exchange announcement, and we haven’t,” when asked if there were ongoing negotiations.
   Andersen said the merger and acquisition landscape in the logistics business has not changed, though he noted some shipping lines entered the business in 2018, an apparent reference to Maersk’s push into logistics and the link-up of CEVA and CMA CGM.
    Evan Armstrong, president of Armstrong & Associates, and one of the leading analysts of the third-party logistics industry, said his company thought a DSV acquisition of Panalpina “made very good strategic sense. It would have advanced DSV from the sixth-largest global 3PL to the fourth largest based upon our 2018 top 50 global 3PL list and would have provided DSV with more opportunities to cross-sell integrated solutions and drive better buy-side purchasing power with carriers from its greatly expanded freight forwarding volumes.
   “Panalpina is the fourth-largest air freight forwarder and DSV is the 10th largest; combined, they would have over 1.6 million metric tons of air freight under management, making them the second-largest air freight forwarder,” he added. “In terms of ocean TEUs, Panalpina and DSV are ranked fifth and sixth, respectively; the combined operation would bring them to 2.9 million TEUs, pushing them into fourth place just behind DHL Supply Chain and Global Forwarding. Panalpina’s operations could have benefited from upgrading to DSV’s IT platform and becoming part of its solid corporate culture.”
   As to the interest of ocean carriers in the logistics business, Armstrong believes, “Ocean carrier/3PL alliances are not a natural fit; 3PLs work to optimize transportation for customers reducing costs, while securing the best-performing carrier capacity. Therefore, 3PLs should be independent from carriers to remain neutral.”