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Robert.Jervis_43227 Apr 27

DSV Panalpina acquires Agility’s Global Integrated Logistics business

DSV Panalpina acquires Agility’s Global Integrated Logistics business
“GIL and DSV are an excellent match”
Two years after the acquisition of Swiss-based Panalpina, the Danish transport and logistics company is once again announcing a large acquisition: Agility Global Integrated Logistics (GIL). M&A is a well-known part of DSV Panalpina’s long-term strategy and the company has demonstrated its ability many times in both acquiring and successfully integrating companies with similar business models as DSV Panalpina. The value of the GIL acquisition is USD 4.2 billion (DKK 26 billion).
Global Integrated Logistics is part of Agility and one of the world’s top freight forwarding and contract logistics providers (3PL). In 2020, the company had USD 4 billion in revenue, mainly related to air & sea freight and a workforce of approximately 17,000 employees.
DSV recently completed the integration of the company’s largest acquisition to date, the Swiss Panalpina, and with the acquisition of GIL, DSV Panalpina will become the world’s 3rd largest transport and logistics company with a combined pro forma revenue of approximately DKK 142 billion (around USD 22 billion) – an increase of around 23% – and a combined workforce of more than 70,000 employees.
Especially the Air & Sea-division, the largest division of DSV Panalpina, will be substantially strengthened with the acquisition of GIL and will consolidate the rank among the largest providers globally with close to 2.8 million containers (TEUs) and more than 1.6 million tonnes of air freight transported annually. The contract logistics capabilities, which are increasingly important due to complex supply chains and changing distribution channels, will strengthen DSV’s Solutions division with GIL’s additional warehousing capacity of more than 1.4 million square metres, mainly in APAC and the Middle East. Furthermore, GIL will add road freight activities to DSV’s network in both Europe and the Middle East and thereby increase DSV’s competitiveness across all three divisions.
DSV and GIL are a strong match with valuable synergies as a result of similarities in both business models, services and strategies. According to the Group CEO of DSV Panalpina, Jens Bjørn Andersen, there are many good reasons to join forces with the Middle Eastern transport and logistics provider:
“GIL and DSV are an excellent match, and we are proud that we can announce our agreement to join forces. The combination of our two global networks will provide us with the opportunity to offer our customers an even higher service level. GIL’s strong market position in APAC and the Middle East complements DSV’s network well and will support our long-term value creation ambitions. Our two groups already share a culture of entrepreneurship and local ownership, and we look forward to welcoming GIL’s talented staff to DSV.”
DSV has long been known for its acquisition strategy and has proven successful in both acquiring and integrating companies, most recently Swiss Panalpina in 2019 and American UTi Worldwide in 2015. The focus on scalability remains one of the key competitive advantages in freight forwarding with significant operational and commercial benefits in a highly fragmented market.
DSV Panalpina and GIL expect to close the transaction in Q3 2021 provided conditions are met and necessary approvals are obtained. Until then, DSV Panalpina and GIL will continue to operate separately and independently.

The following is an an analysis of the deal by Transport Intelligence...

"Danish forwarder DSV Panalpina has added Agility’s Global Integrated Logistics (GIL) division to its growing list of major acquisitions. News broke early on Tuesday (27-Apr) that Agility’s €3.5bn GIL division, which houses the forwarder’s air and sea operations, would be acquired by DSV Panalpina in an all-share deal valued at $4.2bn/€3.7bn. The deal will be funded through the issue of 19.3m new shares in DSV and it values Agility’s logistics unit at a multiple of 23.3 times earnings before interest and tax in the past 12 months. The deal is expected to close in Q3 2021 and comes just two years after DSV’s last major acquisition, the Swiss forwarder Panalpina.

Speaking of the latest acquisition, Ti CEO, John Manners-Bell, said:

“Further consolidation in the freight forwarding market is hardly unexpected and the purchase of Agility Integrated Logistics by DSV Panalpina must be put in the context of two decades of intense acquisition activity. Agility itself has been made up of over 40 deals as forwarders pursue strategies that allow them to build strength and depth on a worldwide basis, not least giving them buying power over shipping and airlines. Although acquisitions are never straightforward, DSV’s management has shown time and again that they have discovered the formula to integrate and even turn around the most challenged of companies. I expect the same in this case, as DSV becomes an even bigger rival to DHL Global Forwarding and Kuehne + Nagel on many key trade routes and sectors.”

At the end of 2020, Air & Sea operations accounted for 62% of DSV Panalpina’s total revenues. In 2018, the last year before Panalpina was integrated, Air & Sea accounted for a significant but smaller 45% of overall DSV revenue. Within GIL, forwarding and project logistics activities account for 84% of revenue, with contract logistics making up the remaining 16%.

Within Agility more widely, GIL is some 75% of all revenue, making it immediately clear that the Agility which remains will be a much-changed business. Focussed on the development activities of its Infrastructure division, what’s left at Agility will be much smaller although much more profitable – at €291m, Infrastructure had EBITDA 1.53x higher than GIL’s €190m.

Agility’s Vice Chairman, Tarek Sultan, said of the deal:

“Agility remains committed to the supply chain industry, and will become the second-largest shareholder in one of the fastest-growing and most profitable logistics companies in the world.

“Agility will be exploring opportunities between DSV and its other businesses, with promising areas of future cooperation potentially including Agility’s Logistics Parks business, Shipa group of companies, and technology ventures. Agility will remain an emerging markets leader, investor in emerging technologies, and champion of sustainable business.”

With the global forwarding industry on a path to ever-increasing digitalisation, it is perhaps significant that Shipa, Agility’s digital offering, is seemingly separated from the deal at this stage. It appears DSV Panalpina’s offering, myDSV, remains the notional digital forwarding offer from the new combination in the immediate term. 

Using 2020’s results as a guide, it’s clear a further boost to the scale of DSV Panalpina’s Air & Sea operations is imminent. Ti calculations show the combination of DSV Panalpina’s Air & Sea divisions with the Forwarding & Project Forwarding revenues of GIL would result in a €12.6bn business. It’s unlikely that the new DSV Panalpina/Agility combination will retain all business and, as 2020 clearly showed, much can happen in the forwarding market over the course of a year, but a straightforward 2020 revenue projection, the deal would see DSV Panalpina rank as the largest global forwarder by revenue.
As for volumes, DSV Panalpina’s announcement states the acquisition “will consolidate [DSV’s Panalpina’s] rank among the largest providers globally with close to 2.8 million containers (TEUs) and more than 1.6 million tonnes of air freight transported annually.” Volumes of that order would make the new DSV Panalpina/GIL combination a sea forwarder similar in scale to DHL GFF (2.862m TEU in 2020) and an air forwarder of similar size to K+N’s operation (1.64m tonnes in 2020). According to Ti calculations, DSV Panalpina/GIL would sit comfortably in the top 3 global forwarders by volume for both air and sea freight.
As the new largest global forwarder by revenue, it seems certain that DSV Panalpina will again push change in the global forwarding market.

Thomas Cullen, Ti’s Senior Analyst, commented:

“The acquisition is hardly a surprise bearing in mind the strength of DSV’s balance sheet and the growth trajectory of the company. Nor is the rationale surprising, with part of the logic of the Panalpina purchase being the geographical diversification of DSV’s markets, buying Agility’s GIL offers exposure to a number of otherwise difficult to access markets in regions such as the Middle East and Africa. In that respect it is not so different from UTi in 2016.

“The only slight note is the absence of exposure to e-retail. This is becoming an increasingly vital part of both forwarding and contract logistics. It might be suggested that this will be DSV’s next target.”