CMA CGM has moved to purchase Wincanton. The Marseilles based shipping and logistics service provider has reached an agreement with the board of Wincanton plc to offer to buy the company’s shares for “£566.9 million on a fully diluted basis”, valuing “Wincanton at approximately £764.9 million (US$972m) on an enterprise value basis” according to a statement issued by Wincanton plc. This price values the shares of Wincanton by more 50% greater than the share price prior to the offer.
The vehicle for CMA CGM’s purchase is a subsidiary of the company’s CEVA contract logistics business called ‘CEVA Logistics UK Rose Limited’.
CMA CGM gives the reasons for buying Wincanton as a desire to “expand CEVA’s offering in the UK, and to acquire complementary grocery and consumer expertise”, which is a reflection of the UK market focus of Wincanton. The growth of Wincanton was crippled by a series of unsuccessful acquisitions in France and Spain in the early 2000’s combined with heavy pension liabilities. Although the management of the company has been successful in rebuilding the stability of the company, it has lacked direction, with even the share price after CMA CGM generous offer being similar to that of the highpoint of its valuation in 2008.
Buying Wincanton will imply a change in CEVA’s market position, as CEVA has generally been less exposed to grocery retailing, something confirmed by Rudolf Saade, CEO of CMA CGM, which commented that “Wincanton’s renowned expertise in designing supply chain solutions for customers in the retail, grocery, eCommerce, construction, infrastructure, energy and defence sectors would enable CEVA to further diversify its contract logistics customer base”. Presumably CMA CGM envisage expanding Wincanton’s expertise out across CEVA’s various global markets, although as Wincanton’s experience showed, this can be both difficult and hazardous.
Even if it would be an exaggeration to describe the acquisition of Wincanton as transformational, it does indicate that CMA CGM is serious about building itself into a large global logistics service provider. It will be interesting to see if it restricts itself to European businesses or seeks to make further purchases in the US or Asian markets.
Author: Thomas Cullen
Source: Ti Insights
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