XPO Logistics swoops up Norbert Dentressangle for $3.5b

XPO’s purchase of the French 3PL is the company’s first international acquisition and gives it a strong foothold in the European market.    XPO Logistics continued its recent acquisition spree Tuesday, announcing late in the afternoon it has reached a definitive agreement to purchase French logistics powerhouse Norbert Dentressangle SA, a company nearly twice its size, for about $3.53 billion in cash and debt.
   The deal, which is expected to close this quarter, would put Greenwich, Conn.-based XPO in the top tier of global third-party logistics providers and increase its revenues to about $8.5 billion per year, nearly two years ahead of its 2017 target of $9 billion. XPO had $3 billion in revenue last year, while Norbert Dentressangle achieved revenue growth of 15.8 percent to $5.5 billion. The combined company will have 129 million square feet of warehouse space.
   “This is a defining moment in the growth of XPO….The acquisition of Norbert Dentressangle is a major leap forward, but we’re still in the early innings of our long-term growth plan,” XPO Chairman and CEO Brad Jacobs said in a statement.
   Norbert Dentressangle is a large contract logistics provider and freight forwarder with a large European trucking operation, reverse logistics and e-commerce fulfillment capabilities. Headquartered in Lyon, France, it has 662 locations and about 42,350 employees. The truck fleet includes 7,700 company-owned vehicles, plus 3,200 trucks sub-contracted with owner-operators, and access to other independent carriers. ND has a diversified base of business, with its largest customer representing less than 4 percent of revenue. Last September, ND made a major acquisition of its own and established a greater footprint in the United States with the $750 million purchase of Jacobson Companies, an Iowa-based warehouse and contract logistics firm.
   ND’s Red Online service generated 242 million euros in revenue last year, up 31 percent from the year before. It serves business-to-business and business-to-consumer customers in the United Kingdom, Spain and France. The company’s contract logistics business accounts for half of revenues and has a 97 percent customer renewal rate, according to XPO. A quarter of the contract logistics revenue is generated in the United States.
   XPO said the combination complements its service offerings, expands its geographic reach and provides cross-selling opportunities to multinational firms. It is the company’s first international acquisition and gives it a strong foothold in the European market.
   Analysts appeared surprised by XPO’s foray into the European market and the size of its acquisition.
   In the space of two years, XPO has grown from a provider of domestic freight brokerage and managed transportation into a full-service 3PL. In 2014, XPO snapped up Pacer International, giving it a significant intermodal, drayage and warehousing capability, as well as New Breed Logistics, an e-commerce fulfillment specialist to go along with its last-mile and expedited truck delivery and truckload brokerage businesses, which were also obtained through a series of roll-up acquisitions.
   Learn more about XPO Logistics and its aggressive growth strategy in the feature story “Growing an Empire” from the April issue of American Shipper.
   “Norbert Dentressangle was not the finished article – it has been growing its freight forwarding business and is weak in Asia – so we can expect its new owners to continue with in-fill acquisitions to address these whitespots,” John Manners-Bell, the CEO of Transport Intelligence, wrote in a blog piece. Ti is a transport and logistics research firm based in the UK.
   XPO said its global freight forwarding revenue will increase to about $425 million annually and that the added ND volume will improve air and sea rates it can obtain for customers.
   XPO Logistics has agreed to purchase 67 percent of Norbert Dentressangle’s stock controlled by the Dentressangle family. Once antitrust clearance is received from Germany and the United States, it will make an all-cash tender offer of 217.5 euros per share for the outstanding shares of the company.
   The deal values ND at nine times the company’s operating profit, which is in line with or better than many recent transactions that have been going for 10 times EBITDA, or more.
   XPO said it has more than $1 billion in cash and a $2.6 billion financing commitment from Morgan Stanley, as well as a revolving line of credit worth up to $415 million to cover transaction costs.
   Hervé Montjotin, chairman of the executive board and chief executive officer of Norbert Dentressangle, will serve as chief executive officer of XPO’s European business and president of the parent company. XPO promised not to reduce the number of full-time employees in France for at least 18 months from closing the deal. The ND operations will be rebranded as XPO Logistics after the closing.
   XPO said it intends to make substantial investments in its European operations, in part through the deployment of technology. For example, it will deploy its proprietary Freight Optimizer platform in Europe to support carrier sourcing and customer service in the 95 billion euro road transport market in the UK, France and Spain.
   XPO expects combined annual spending on technology of about $225 million.
   Officials said the timing of the transaction was affected by signs of economic green shoots in Europe after years of weakness, the strong dollar exchange rate and the acquisition opportunities presented by a fragmented European transportation and logistics industry, where ND holds a strong position.
   Earlier this month, American corporate icon FedEx tentatively agreed to purchase Netherlands-based courier TNT Express. FedEx officials also cited the rebirth in the European economy and the strong dollar as factors in their buying decision.