Maersk’s Acquisition Of LF Logistics Is Said to Be ‘Significant Milestone’

Maersk’s acquisition of LF Logistics, worth $3.6bn, represents a “significant milestone” in its transformation into a global integrator of container logistics, according to the CEO of Maersk’s 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 per the agreement that regulates Maersk’s Acquisition of LF Logistics, the former promised to enter a “strategic partnership” with Li & Fung to develop logistics solutions, aiming to more than double the turnover and operating profit by 2026.

CEO of LF Logistics, 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.

According to Maersk’s regional MD for Asia Pacific, Ditlev Blicher, the addition of the LF Logistics’ omnichannel fulfillment 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.

As part of the deal, Maersk has agreed to 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.

Source: Shippingherald

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