Lots of news on deal-making and more in the 3PL sector in the last week, including XPO Logistics saying it will see a huge drop in revenue from its biggest customer.
First, French ocean container carrier CMA CGM, the second largest in the sector behind alliance partner Maersk Line, is moving ahead with a $1.65 billion deal for full control of Swiss-based CEVA Logistics AG, hoping to generate revenue streams from freight logistics to add to its core ocean-transportation business.
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Last week, CMA CGM issued a public tender offer of 30 Swiss francs ($30.25) a share for the roughly two-thirds of Ceva that it doesn't already own.
Last month, Ceva's board of directors said that the planned CMA CGM offer "provides a fair exit opportunity" for some shareholders interested in cashing out, but that it believes investors could realize "a higher value" by retaining their holdings in the business under CMA CGM ownership.
The takeover plan, which was first announced in October, was cleared by the European Commission last week.
Some – but certainly not all - container lines are looking to become broader logistics services providers, expanding logistics offerings, in part through acquisition. Maersk Line CEO Soren Skou, for example, recently said the company's strategy is to become a an end-to-end logistics provider such as UPS and FedEx. (See Container Carriers Starting to Take Different Strategic Paths.)
Meanwhile, 3PLs in Denmark and Kuwait are vying for control of Swiss freight forwarder Panalpina, potentially setting off a bidding war as consolidation in the logistics sector continues on.
Danish company DSV raised its offer for Panalpina to $4.3 billion last week, after the Swiss-based company disclosed it was in separate talks to merge logistics operations with Kuwait's Agility Group.
DSV revised offer was up to 180 Swiss francs ($178.6) per share, 10 francs more than its the previous bid made earlier in February. DSV also said it would now be an all cash deal now rather than with a cash and stock deal offered previously.
However, Panalpina's top shareholder, the Ernst Goehner Foundation, had interestingly urged the board to reject the earlier DSV offer, saying the company should in fact pursue its own "consolidator strategy."
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The new talks with Agility focus on whether Panalpina can take over Agility's logistics network in return for Agility becoming a substantial Panalpina shareholder, a person involved in the matter, the Wall Street Journal reported..
Panalpina said in a statement it is reviewing the DSV offer.
XPO Says Drop in Revenue from Largest Customer Will Hit Earnings Hard
XPO Logistics, which has itself grown aggressively through a series of acquisitions in recent years under CEO Brad Jacobs, lowered its profit outlook for 2019 last week, citing a substantial loss of business from its largest customer.
 That made it the second time XPO had revised its earnings forecast down in the past three months.
XPO did not identify the customer, but said it involved its "postal injection" business, under which XPO trucks pick up bulk shipments of parcels from fulfillment centers and take them to local US Postal Service center for final delivery.
That customer will reduce XPO revenues by a substantial $600 million in 2019, the company said, with revenues from the customer expected to fall from some $900 million to $300 million this year.
Speculation of course is that the only potential company that could have those kind of volumes would be Amazon, and if that is accurate likely is bringing a large amount of logistics services it now outsources to XPO in-house.
As a result of all this, XPO is changing its strategy, pulling back from plans to acquire more companies to increasing its stock buy-back program instead.
The company completed a $1 billion share buyback on Feb. 4, and said its board authorized a new $1.5 billion program last week in an effort to bolster the stock price.
"We were trying to buy a good one or two sensible companies that would fit with us and we were getting very close, and then our stock came down quite a bit," Jacobs said last week, when the company reported fourth-quarter results that missed analyst estimates. When "we ran the numbers ourselves it became very, very clear that the best use of our capital would be to buy our stock ourselves" instead of pursuing more acquisitions.
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