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Kintetsu buys APL Logistics in $1.2 billion deal

Price tag for Singapore-based APL Logistics is significantly higher than the $750 million first mooted when NOL announced in August that it was exploring a sale or IPO.

   The Singapore-based parent company of liner carrier APL has sold off the carrier’s sister company APL Logistics to Japan’s Kintetsu World Express for $1.2 billion, the Tokyo-based company said Tuesday.
   The price is considered higher than most analysts expected APL Logistics parent NOL to fetch. NOL said in August it was exploring a sale or initial public offering of its logistics business. Initial reports suggested NOL was seeking around $750 million for the business.
   Reuters pegged the reported sale prices to Kintetsu at 10 to 12 times earnings before interest, tax, depreciation and amortization, a key metric for determining the relative value of an acquisition. Ten- to 12-times EBITDA is considered a high multiple.
   “APL (Logistics) is a logistics company with strengths in logistics services and various high value-added services for companies in the automobile industry and retail industry, among others, and it is expanding its business globally, with a focus on North America and Asia,” Kintetsu said in a statement. “By welcoming APL into the KWE Group, we can expect to complement the KWE Group’s freight forwarding services in terms of both commodities handled and regions for expansion.”
   According to NOL’s 2014 financial statements released Friday, APL Logistics had operating profits of $67 million for the year, in line with its profits for 2013, on revenue of $1.7 billion. NOL declined at the time to comment on whether a sale of APL Logistics was in the works.
   The container line APL has incurred a collective operating loss of $1.1 billion from 2009 through 2013, including a $231 million loss in 2014, according to research by American Shipper. That’s the fourth biggest loss during that period of the 15 publicly-traded carriers American Shipper tracks. Its logistics business, in general, has been profitable in that period.
   “This is a strategic move that will allow us to focus on improving our liner shipping business, while at the same time enabling APL Logistics to grow,” said Ng Yat Chung, group president and chief executive officer of NOL. “The transaction will also strengthen our balance sheet and unlock value for our shareholders.”
   Ng said the net proceeds of the sale will be applied to strengthen its financial position, including to repay its borrowings.
   Satoshi Ishizaki, group president and CEO of KWE, said the company intends to retain APL Logistics’ headquarters in Singapore and run it as a separate unit.
   “KWE will continue to invest in and expand APL Logistics’ services so as to serve our customers better,” Ishizaki said.
   “The sale is hardly a surprise as NOL had indicated towards the end of last year that it was looking to sell the contract logistics provider,” Thomas Cullen, senior analyst at Transport Intelligence, wrote in a brief Tuesday. “However the generous price on a firmly double digit multiple of earnings is a little more unexpected.
   “Kintetsu had revenue of $2.8 billion and operating profit of $139 million in 2013, with the last three quarters of 2014 seeing a 14 percent increase in net profit in yen terms. Buying a company for more a third of it revenue is interesting and would suggest a very ambitious strategy for the Japanese company.”
   Cullen said APL Logistics is useful to Kintetsu, “as it offers not merely a huge expansion in the size of its contract logistics business but also a major change in the nature of that business. At present, despite a useful business in China, India and other Asian markets that contributes over a quarter of revenue, APL Logistics has almost two-thirds of its business in the Americas, with trades such as movements between the U.S. and Mexico for large vehicle manufacturers being key. Therefore this deal will transform Kintetsu both in terms of its business and geographical profile as well as its finances.”
   APL Logistics’ provides an array of services across the transportation, warehousing and distribution landscape, including forwarding, contract logistics, and domestic transportation in 60 countries. Its key market segments include automotive logistics (where it operates joint ventures in China and India, among other regions) and retail. The company maintains more than 20 millions square feet of warehousing space and has 5,600 employees at its 110 offices worldwide.