Deutsche Bahn has sold Schenker to DSV. After years of speculation and discussion, the German state railway has finally agreed to sell Schenker, the freight forwarding, road freight and contract logistics company that it bought in 2002. Contrary to press speculation, the purchaser is Danish freight forwarding, road freight and contract logistics company, DSV.
The price agreed is €14.3bn on what DSV calls an “Enterprise Value basis”.
The logic for Deutsche Bahn is fairly obvious. As Richard Lutz, CEO of Deutsche Bahn AG commented, “focusing on DB’s core business is a key requirement for implementing the long-term Strong Rail strategy”. He also said that reducing Deutsche Bahn’s level of debt will “make a substantial contribution to the Group’s financial sustainability”. The sale of Schenker is highly political and Deutsche Bahn has been able to extract guarantees around the retention of jobs within Schenker after the purchase. The supervisory board of Deutsche Bahn still has to approve the deal, however this appears to be a formality.
DSV summarised the effects of the purchase as a “transformative transaction for DSV”, which has created “a world-leading player within the global transport and logistics industry”. After having absorbed Schenker, “DSV will have a combined revenue of DKK 293 billion” which is €39bn or €43.7bn” and a workforce of 147,000 people in 90 countries.
DSV explained that the acquisitions were an “integral part” of “DSV’s growth strategy”. In addition, the company now has the “unique opportunity to create and develop a world-leading logistics provider”. Certainly, DSV will now have stronger positions in many of its markets. It will be one of the worlds largest air and sea freight forwarders. It will be a very large contract logistics provider covering numerous sectors and, DSV will probably be the largest road freight provider in Europe with a particular strength in ‘less-than-truckload’ services. It is a good question what the impact on the market will be of such a large new provider emerging. Although some parts of DSV will benefit from economies of scale, notably road freight, the impact of others, such as contract logistics may be more complex.
For many companies, a purchase of such size would represent a considerable risk. Integration issues in areas such as IT but also market strategy, can negate any added-value from economies of scale. However, DSV has demonstrated on a string of acquisitions that it is extraordinarily good at absorbing other organisations. Not only is strategy well worked-out but execution is generally also energetic. Therefore, judging by past experience, it is likely that DSV will become one of the worlds leading logistics service providers. What its strategy will be from here is unclear. Certainly, DSV may wish to rebalance its geography away from European markets, however its strategy of driving growth through acquisition may become increasingly hard to sustain due to its size.
Source: Ti Insight
Author: Thomas Cullen
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