Cat, Horizon 3PL spin-offs: more to come?

Cat, Horizon 3PL spin-offs: more to come?    Announcements in recent weeks that Caterpillar Inc. and Horizon Lines are looking to sell their respective logistics business could be part of a trend in merger and acquisition activity in the 3PL sector.
   “There has been a serious uptick in the amount of M&A activity as the market has come back and the economy has come back. The people who could invest or buy have a lot more capital available,” said Richard Armstrong, chairman and chief executive officer of Armstrong & Associates in Stoughton, Wis., a logistics consulting company.
   “There is more interest in buying and selling; there is more interest in IPOs, and I expect that is going to continue,' he said. 'I think there is going to see more activity this year than we did last and we are going to see some pretty significant deals.”
   Caterpillar said last week it was exploring a sale of Caterpillar Logistics Services 3PL business or structuring it as an independent business.
   Caterpillar said external sales from about 50 customers last year accounted for 29.6 percent of its $2.23 billion in logistics. The proposed spin-off would not include the part of Cat Logistics that handles Caterpillar's manufacturing logistics and transportation operations or Caterpillar parts distribution.

Armstrong

   Armstrong ranked it as the 24th-largest 3PL by 2009 revenues, and said only a small number of companies would be able to make such a large acquisition, mentioning firms such as Deutsche Post DHL, DB Schenker, Kuehne + Nagel, UPS, Penske or Ryder. At the end of last year, Ryder purchased Holland, Mich.-based Total Logistic Control for about $200 million.
   “It’s a limited group, companies with net revenue of several billion dollars already,” he said.
   A case study on Armstrong’s Web site from December 2008 said Cat Logistics had 12,000 employees working in 110 facilities globally, a warehousing footprint of 27 million square feet that processed 160 million orders annually and managed $1.6 billion in purchased transportation.
   It has core capabilities in value-added warehousing and distribution in manufacturing support, vendor managed inventory, kitting, sequencing, light assembly, packaging, labeling and spare/service parts distribution.
   “It couples these with international and domestic transportation management operations to provide an integrated end-to-end supply chain management offering,” Armstrong said. And while most of its customers are in the automotive and industrial manufacturing sectors, it also had companies in industries such as mining, oil and gas, aerospace-defense, technology and consumer durables.
   Horizon Lines said in late February that it would sell its Horizon Logistics business. The company is under financial pressure after agreeing to pay a $45 million fine to the U.S. government after pleading guilty for its role in a price-fixing conspiracy in the U.S./Puerto Rico trade.
   Horizon Logistics accounted for only a small part of Horizon’s $1.2 billion in revenue last year. The company no longer reports the segment independently, but it had revenues of $37.7 million in 2009. A U.S. Securities and Exchange Commission filing last year said revenue in the first nine months of 2010 was up in part because of a nearly $18 million increase in third-party logistics operating revenues. ' Chris Dupin