DSV to acquire Panalpina for $4.6 billion

   The Danish logistics company DSV will acquire Panalpina, the two companies said Monday, in an all-stock deal worth about 4.6 billion Swiss francs ($4.6 billion).
   The combined company, to be known as DSV Panalpina, will become the world’s fourth largest freight forwarder with annual pro forma revenue of approximately 118 billion Danish krone ($17.7 billion) and a combined workforce of more than 60,000 employees.
   “Size matters in our fragmented industry,” said Jens Bjorn Andersen, the chief executive officer of DSV, which is headquartered in Hedehusene (near Copenhagen). He said both companies are strong individually and will be stronger once they have merged. He said DSV will benefit from Panalpina’s unique customers and vertical expertise.
   Andersen said the merger will create cross-selling opportunities and higher growth potential for the combined companies as well as opportunities to reduce costs and consolidate operations including administration, warehouses and logistics facilities. The companies will consolidate information technology infrastructure, using lessons learned from DSV’s acquisition in 2016 of UTi Worldwide, he added.
   Acquiring Panalpina will increase DSV’s revenues in the Asia Pacific region from 10 to 17 percent of its total. Andersen said Asia is a faster growing region than Europe, the Middle East and Africa (EMEA) where DSV currently earns most of its revenue. On a proforma basis, after the merger, the share of DSV’s revenues in the Americas would also grow from 19 percent to 21 percent while the EMEA revenue would drop from 71 to 62 percent of the total.  
   The deal will also change DSV’s mix of business. Currently DSV obtains 39 percent of its total revenue from road operations, 23 percent from air forwarding, 22 from sea forwarding and 16 percent from supply chain solutions. Panalpina is strong in air forwarding, and not in the road transport business. On a proforma basis, the combined company would see its air revenue boosted to 33 percent of total revenues, sea revenue growing to 27 percent and road revenue falling from 39 to 26 percent and revenue from solutions falling from 16 to 14 percent.
   The companies said the combined company would be the fourth largest forwarder in the world behind DHL, Kuehne + Nagel and D.B. Schenker, and ahead of Minnesota-based C.H. Robinson.
   DSV will acquire Panalpina with shares valued at about $4.6 billion. DSV has been pursuing an acquisition of Panalpina since January. Agility Group had also held talks with Panalpina about “potential strategic opportunities” earlier this year, but those talks have been discontinued.
   DSV says its new, sweetened offer has the support of shareholders representing 69.9 percent of the registered shares of Panalpina. These include Ernst Göhner Foundation, which has a 46 percent stake in Panalpina, as well as the Swedish investment firm Cevian and Artisan Partners Limited Partnership.
   Jens Lund, DSV’s chief financial officer, said the company is hoping for remaining shareholders to accept the offer, saying it would make the integration more smooth.
   DSV shareholders will also have to approve an increase in their company’s capital at a meeting later this year.
   DSV is now offering 2.375 DSV shares for each Panalpina share, with fractional DSV shares settled in cash. Using the closing price of DSV prior to the date of Monday’s announcement, the companies said the offer represents a premium of approximately 43 percent to the closing price of Panalpina shares on Swiss SIX stock exchange on January 15, the day before DSV’s initial proposal to Panalpina was published. The companies hope to complete the deal in the fourth quarter of this year.
   Andersen said DSV expects the deal to be accretive to DSV’s earnings per share (diluted and adjusted) in the second year after the acquisition is completed.
    The two companies said, “An integration committee comprising an equal number of Panalpina and DSV representatives will be established to oversee the integration process and ensure a fair treatment of all employees. A thorough evaluation will be carried out with the aim to maintain relevant functions and competences in Switzerland” where Panalpina is headquartered in Basel.