A.P. Moller-Maersk A/S is buying an Asian warehouse specialist in a transaction worth $3.6 billion in enterprise value, expanding its push into land-based logistics that’s become more profitable than its traditional sea-container business.
The world’s biggest container line is acquiring Hong Kong-based LF Logistics in an all-cash deal, it said on. The transaction is second only to its $4 billion takeover of Hamburg Sued in 2017.
Maersk, which transports about a fifth of the world’s containers at sea, has decided to expand in land-based logistics where there’s more potential for growth and profit margins are higher. Earlier this year, the Copenhagen-based carrier also announced plans to buy air-freight company Senator International as it seeks a presence in all parts of the transport chain.
“We are on a journey away from being a container line sailing with containers from Hong Kong to Rotterdam to being a logistics company delivering solutions which enables our clients to get all the way from where goods are produced to where consumers are,” Chief Executive Officer Soren Skou said in an interview.
The deal represents “a big bet on Asia,” Skou said. It “means that we can also help our clients service the Asian market, which is where growth will be in the future.”
With the purchase, Maersk gets an additional 10,000 employees and more than 200 warehouses in 14 countries. Maersk will boost annual revenue in its logistics and services business by about $1 billion with the acquisition.
The sellers are Li & Fung Ltd., which owns 78.3% of LF and Temasek Holdings Pte., which has the rest. Maersk said it’s paying a multiple of 14.4, based on enterprise value to earnings before interest, tax, depreciation and amortization. The deal includes an earn-out with a total value of as much as $160 million related to future financial performance.
The deal comes as Maersk is making record profits from a surge in freight rates. The price for transporting containers has skyrocketed as bottlenecks in the global supply chain have, in effect, removed about 15% of the world’s shipping capacity. Maersk is set to book 2021 net income of $17 billion, or six times the result in 2020, according to analyst estimates.
The acquisition excludes LF’s freight-forwarding unit, which will remain with the owners. Maersk has previously said it won’t pursue freight forwarders, but would instead focus acquisitions on companies with logistics assets or specialized technology.
The transaction is expected to close in 2022, pending regulatory approvals.
Swiss-Italian container shipping line MSC Group offered to buy the African assets of the logistics unit of Bollore Group for $6.4 billion in enterprise value. Maersk had reportedly been looking at the deal, along with other transport companies.
“We are still looking to buy businesses in the areas where we feel like we are missing some things in our portfolio, but the most relevant thing for us is to continue organic growth,” Skou said. “We are not interested in buying giant companies just to buy something big.”