DSV Agrees to Buy Deutsche Bahn's Schenker Logistics Arm For Over $12 Billion — 2nd Update

By Dominic Chopping

Danish logistics company DSV said it would buy Deutsche Bahn's logistics arm for more than $12 billion in cash, winning a monthslong sales process that saw sovereign wealth funds, private equity firms and shipping giant Maersk all weighing bids.

The Wall Street Journal reported Thursday that a consortium led by CVC and with Abu Dhabi Investment Authority, Qatar Investment Authority and Singapore's GIC as partners had made a rival offer.

"The commercial and operational fit between all three divisions of DSV and Schenker will provide strong opportunities to develop the combined business in the coming years, which in turn will contribute to growth, job creation and strong financial returns," DSV said.

DSV has grown through a series of acquisitions from a small trucking company into a global transport and logistics provider offering services through its three units of road, air and sea, and a solutions business that includes fulfillment and warehousing.

The freight forwarding market is highly fragmented, with the top 20 companies holding only around 30%-40% of the market share with the rest of the market consisting of multiple regional and local providers.

Merging DSV--the current number three player by market share--with number four forwarder Schenker, should propel the combined group to become the largest global provider globally with a market share of around 6% to 7%, overtaking both Deutsche Post's DHL and Kuehne + Nagel.

Speaking on a call with journalists after announcing the deal, DSV Chief Executive Jens H. Lund said he expects the combination to enhance its network, especially in the road business where Schenker has a little bit larger footprint, while expanding its global reach and strengthening its position in Europe as well as adding scale in Asia-Pacific and the Americas.

The Danish company will pay 11 billion euros ($12.18 billion), financed through a combination of equity financing of around 4 billion euros to 5 billion euros and debt while its current share buyback will be stopped immediately.

The deal values Schenker at 14.3 billion euros including debt.

Together, DSV and Schenker will have a combined revenue of 293 billion Danish Kroner ($43.48 billion) and a joint workforce of around 147,000 employees across more than 90 countries.

The market should take the news positively given it has been a close race and most recently an acquisition price range of 14 billion-16 billion euros had been reported, JPMorgan said in a note to clients.

"We see material upside for the shares ahead, supporting a multi-year growth story, given the significant opportunity for synergies but also likely transformational for the group overall given market share will go to 7% from 4% previously," the bank said.

Germany's state-owned rail-and-logistics operator Deutsche Bahn launched a sale process for Schenker in December to focus on its core business of rail transport and infrastructure as well as cutting its debt pile of over 30 billion euros.

"We are focusing our business on rail infrastructure in Germany that serves the common good," Deutsche Bahn Chief Executive Richard Lutz said Friday. "At the same time, reducing debt will make a substantial contribution to the group's financial sustainability."

DSV plans to invest 1 billion euros in Germany over the next five years to contribute to ensuring long-term growth and job creation.

The deal is subject to regulatory approvals with completion expected in the second quarter of 2025.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

September 13, 2024 05:20 ET (09:20 GMT)

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