News / DSV the 'logical buyer' for DB Schenker – it's 'a step too far' for Maersk

© Diane Picard |

A leading market analyst considers DSV “the logical buyer” of DB Schenker, amid reported interest by some 20 companies which had until 6 February to submit registration documents.

But, he added, acquiring the German logistics and forwarding group would be “a step too far” for  ocean shipping giant Maersk.

The next stage in the DB Schenker sale process is likely to see owner German state railway Deutsche Bahn whittle down the number of potential candidates to five.

“A painfully long sale process is now kicking into high gear, and DSV remains the front-runner in our view,” Tobias Fromme, senior research associate at business consultant Bernstein, told The Loadstar.

“It has the highest synergy potential and the lowest execution risk. Our updated, bespoke, customisable merger model continues to point to circa-39% EPS (earnings per share) accretion at a valuation of €15bn ($16.16bn).”

He believed acquiring DB Schenker would be “worth the most to [DSV], and they should be able to pay the most for it”.

Following recent changes at DSV – a new CEO and Saudi Arabian joint-venture – investors appear to be questioning whether this is the same DSV they saw in the past, added Mr Fromme.

But, he said: “A transformative acquisition would be an emphatic ‘yes’. We continue to expect a deal by mid-year and ascribe a circa-two-thirds probability to DSV being the acquirer.”

He explained that, according to Bernstein’s DSV-Schenker merger model, cost synergies of around Dkr15.4bn (just over $2.2bn) could be expected.

“This involves moving the acquired business onto DSV’s IT architecture and reducing headcount in order to improve profitability. We saw this to great effect in previous [DSV] deals for UTi and Panalpina.

“In our view, DSV would likely have the highest level of churn of any acquirer, as it more tightly manages its business mix, steering away from low-margin freight. We expect volume churn of around 25% in air and sea businesses, 15% in road and 20% in contract logistics, concentrated in the first quarters post-close, before returning to a growth path thereafter.”

Mr Fromme also explained that the German government needed cash to invest in the “archaic” railway infrastructure and would favour the highest bid – especially after recent national budget hiccups.

“That being said, investors cannot yet bank on a deal. German politicians may resist a sale to a company that typically sheds 45% of the increase in headcount in the 18 months post-deal. And there remains an outside chance that private money, or even DHL, overbids,” he added.

Meanwhile, at a conference call that followed Maersk’s Q4 and annual results recently, CEO Vincent Clerc said it would be “irresponsible” for Maersk not to consider the acquisition of DB Schenker.

However, Mr Fromme is sceptical. He said: “We’re not surprised that Maersk is looking at DB Schenker as a potential expansion of its Logistics Services division. They have already spent more than $8bn adding to their capabilities (both logistics and terminals), and DB Schenker is one of the largest freight forwarders in the world.”

But a Schenker deal would be “a step too far”, he believed.

“Yes, Maersk is undergoing a substantial transformation. It used to be the largest container shipping company in the world, but is now banking on the integration of logistics companies in order to exploit synergies and improve its client offerings. The strategy is to make a huge strategic (and financial) bet on Logistics Services and on becoming ‘the integrator of container logistics’.

“But let’s not call it freight forwarding, as there is no ocean capacity brokerage because all volumes travel on Maersk vessels.

“DB Schenker is substantially larger than any of [Maersk’s] acquisitions to date, and we see it as fraught with too much execution risk to be attractive.

“In our view, the company is more likely to stick to bolt-ons and organic expansion rather than taking on a forwarding behemoth like Schenker.”