Maersk is paying $3.6bn for Li & Fung’s contract logistics enterprise because the world’s largest container delivery line works to spice up its land-based operations.
Flush with money from report excessive delivery freight charges, the Danish group is searching for to transcend its core ocean enterprise and add on all the things from ecommerce capabilities to street and air freight.
Maersk is shopping for the contract logistics a part of LF Logistics, a Hong Kong-based firm owned 78 per cent by dad or mum group Li & Fung and Temasek holding the remaining. It can additionally enter right into a strategic partnership with Li & Fung.
“The acquisition of LF Logistics is a vital and really strategic milestone on our journey to develop into the worldwide integrator of container logistics,” mentioned Maersk chief govt Soren Skou.
Container delivery teams have loved a bumper yr as tight provide chains and booming demand following the primary wave of the Covid-19 pandemic have led to sky-high freight charges.
Whereas many freight strains have made giant orders for brand new vessels to be delivered in a number of years, Maersk and French competitor CMA CGM have been focusing extra on land-based logistics to assist them compete towards the likes of DHL and Kuehne+Nagel as ecommerce quickly expands.
LF Logistics operates 223 warehouses in 14 international locations throughout Asia and works with vogue, retail and shopper items multinationals within the area.
The deal has an enterprise worth of round $3.6bn together with lease liabilities, whereas an earnout of an extra $160m fee based mostly on future monetary efficiency is feasible. Li & Fung will retain LF’s international freight administration enterprise as a part of the deal.
It greater than doubles LF’s valuation from 2019 of $1.4bn when Temasek, Singapore’s state-backed funding firm, purchased its stake.
Jorgen Lian, delivery analyst at DNB in Norway, mentioned the acquisition was a “substantial growth” of Maersk’s logistics enterprise however at a heady value, which might pressure the Danish group to indicate it will possibly realise its development targets.
LF’s contract logistics operations is anticipated to have revenues of $1bn this yr with adjusted earnings earlier than curiosity, tax, depreciation and amortisation of about $250m. Maersk itself is anticipating underlying ebitda of $22bn-$23bn this yr, up from $8.3bn final yr.
“With this transfer, we’ll increase our warehousing and distribution providing and reply to the quickly rising wants of our prospects for contract logistics,” mentioned Vincent Clerc, Maersk head of ocean and logistics.
Joseph Phi, chief govt of each Li & Fung and LF Logistics, added: “We recognise that for LF Logistics to be a worldwide chief within the trade, attaining scale is of paramount significance. Maersk supplies the perfect match for our folks and our prospects.”