Consolidation in the cold storage industry is continuing at breakneck speed, with Lineage Logistics announcing on Monday that it had signed definitive agreements to acquire Emergent Cold.
While the companies did not disclose the terms of the deal, the Wall Street Journal reported Lineage is paying more than $900 million for Emergent. The acquisition is expected to close in 2020, subject to customary closing conditions and regulatory approvals.
” Food producers, manufacturers and retailers are looking for cold chain partners who can offer a dynamic and truly end-to-end temperature-controlled logistics solution, and one that can reach every corner of the world,” said Greg Lehmkuhl, president and chief executive officer of Lineage. “Welcoming Emergent to the Lineage family not only adds significant capacity to our international footprint, but also deepens our commitment to our port strategy and international trade. We are better able to help customers respond to constantly shifting market dynamics, such as global network optimization, tariff impacts, consumer preference shifts, and much more, while at the same time unlocking new potential market opportunities to sell their goods.”
Novi, Michigan-based Lineage Logistics was already ranked as the largest refrigerated warehouse company in the world by the International Association of Refrigerated Warehouses.
Lineage Logistics said with the purchase of Emergent it will add 46 facilities in the United States, Australia, New Zealand, Vietnam and Sri Lanka and have more than 1.7 billion cubic feet of cold storage space at 260 facilities in 10 countries.
San Francisco-based Bay Grove LLC is the principal investment firm backing Lineage.
Emergent was founded in 2017 by Elliott Management in New York and Neal Rider, Emergent’s chief executive officer.
The acquisition will further broaden Lineage’s footprint and add a newly constructed distribution center in the Dallas-Fort Worth market as well as four U.S. port facilities in New Orleans, Houston and Charleston.
In addition to being a market leader in cold storage in Australia and Vietnam, in August 2019 Emergent acquired New Orleans Cold Storage.
Lineage already had warehouses in the United States, Belgium, China, the Netherlands, the United Kingdom and Vietnam.
In 2018, Lineage opened Cool Port Oakland in partnership with Dreisbach Enterprises and acquired Yearsley Group, a leading logistics service provider and frozen food distributor in the U.K. In May 2019, Lineage acquired Preferred Freezer Services, and in September 2019 acquired two cold storage facilities from Van Soest Coldstores in the Netherlands.
“Joining Lineage accelerates our goal of providing the highest quality global cold chain solutions to our customers,” said Rider. “Lineage has established itself as a leader in our industry, and expanding its global footprint and port presence with the addition of Emergent will create incredible opportunities for our collective customers.”
Consolidation in the refrigerated warehouse business provides economies of both scope and scale, says Ted Prince, the founder and chief operating officer at Tiger Cool Express, a company that provides temperature-controlled intermodal transportation in the U.S. with a fleet of 750 domestic, 53-foot reefer containers.
“Scale reduces your average cost and scope makes you a one-stop shop for customers,” he told FreightWaves. Larger companies can achieve economies by reducing their cost of capital, information technology, including warehouse management systems.
Cold storage warehouses, especially those that handle frozen products, are expensive to build, and Prince noted that “like with any other asset you want to maintain high utilization — if you have scale and scope, you’ll have a portfolio of customers that will help you achieve that.”