Search By Topic The Green Supply Chain Distribution Digest
Supply Chain Digest Logo

Category: Transportation and Logistics

Supply Chain News: DHL, XPO both Pull Back from Further Acquisitions – but for Very Different Reasons

 

DHL Says Regulators will not Approve Big Acquisitions, while XPO Says Stock Undermined by Short Seller Report

 

March 19, 2019
SCDigest Editorial Staff

In general, the mergers and consolidation seen in the logistics sector for the past decade continues on.

As evidence of that, note container shipper giant CGA CGM moving to acquire the two-thirds of global third-party logistics form Ceva it doesn't already in recent weeks, as the ocean container carrier looks to build a more end-to-end logistics capability.

Supply Chain Digest Says...

 

 

Now under shareholder pressure, XPO decided to put further deal making on hold

What do you say?

Click here to send us your comments
Click here to see reader feedback

Or consider the bidding war for control of major Swiss freight forwarder and 3PL Panalpina between Danish and Kuwaiti interests.

But the CEO of Deutsche Post , parent company of the world's largest logistics company, DHL, says acquisitions are unlikely due to its current scale, while the CEO of XPO Logistics, which until recently was growing rapidly as a result of a series of acquisitions, says his company's appetite for takeovers has been quashed at least for now due to Wall Street shenanigans.

Deutsche Post CEO Frank Appel recently told the Wall Street Journal's Jennifer Smith that DHL is already so big there are few acquisitions really large enough to move the revenue needle significantly that would not likely run the company afoul of antitrust regulators.

So instead, DHL must try to find ways to generate growth organically from its freight forwarding and logistics business.

"In global forwarding…there is a lot of M&A activity going on, but we are still the largest," Appel told the Journal's Smith. "So we think it's better to focus on ourselves."

DHL is the largest logistics services company, ahead of number 2 Kuehne + Nagel.

What about acquiring one of many new age logistics tech start-ups, such as freight matching service Convoy or electronic forwarder Flexport?

Not right now, Appel says, noting that "The prices are high."

He added that "that's the reason why we would rather develop it ourselves," though noting it "doesn't mean that we won't change our mind in the future."

Meanwhile, XPO Logistics under aggressive CEO Brad Jacobs, made big news in February when it announced that revenue this year from its largest customer – universally believed to be Amazon – would fall from $900 million in 2018 to just $300 million this year.

That lost business would drive earnings down for the year versus previous estimates, while Jacobs also said for now at least XPO would stop looking for acquisitions and use its capital to buy back its shares after the stock price tumbled on the earnings news.



(See More Below)

CATEGORY SPONSOR: SOFTEON

 


But it turns out there is a back story here.

As also reported by the Journal's Jennifer Smith, XPO walked away from a potential acquisition late last year after a negative short-seller report triggered a decline in the logistics company's share price.

Short sellers bet against a company's stock price and make money if it falls. This often leads to tactics to create negative perceptions about that company to push the stock price lower.
The December report was from hedge-fund manager Spruce Point Capital Management, and it accused XPO of hiding losses through aggressive accounting.

It also criticized the acquisition strategy Jacobs used to build XPO into one of the largest logistics and freight transport providers in North America.

XPO says that the report was "intentionally misleading, with significant inaccuracies."

But the company's stock price, which was already trending down, fell a sharp 26% the day the report was released.

Now under shareholder pressure, XPO decided to put further deal making on hold, even though the company said that before the report it had planned to spend up to another $8 billion on more acquisitions.

Rather, it has announced plans for two share buyback programs totaling some $2.5 billion that it hopes will send shares higher.

Company was close to doing an acquisition when share declines pushed XPO to turn to stock buybacks, Smith reports.

Jacobs has not identified the company it planned to acquire.

Jacobs also says that despite the recent stock market turmoil, XPO fundamentals remain strong.

Organic revenue growth was 9.3% in 2018, while XPO's adjusted full-year earnings before interest, taxes, depreciation and amortization increased by a strong 14.3% compared with 2017.


Any reaction to this news on DHL and/or XPO? Let us know your thoughts at the Feedback section below.

 

Your Comments/Feedback

 
 

Features

Resources

Follow Us

Supply Chain Digest news is available via RSS
RSS facebook twitter youtube
bloglines my yahoo
news gator

Newsletter

Subscribe to our insightful weekly newsletter. Get immediate access to premium contents. Its's easy and free
Enter your email below to subscribe:
submit
Join the thousands of supply chain, logistics, technology and marketing professionals who rely on Supply Chain Digest for the best in insight, news, tools, opinion, education and solution.
 
Home | Subscribe | Advertise | Contact Us | Sitemap | Privacy Policy
© Supply Chain Digest 2006-2019 - All rights reserved
.