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Spurred by a recent history of deal-making, 2017 was a transformational year for Hapag-Lloyd, and it managed to shore up its core business over the past 12 months. However, could future M&A involve the takeover of other ancillary assets?
How about the purchase, for instance, of a freight forwarder, given the increasing paucity of suitable targets in the container shipping industry?
In principle, I would suggest that such an option should not be written off, considering the current competitive environment, and could ...
Comment on this article
Alan
April 17, 2018 at 2:33 pmWhy would APM sell when their strategy is to integrate all their container logistics businesses, and become more asset lite themselves?
Ale Pasetti
April 17, 2018 at 2:51 pmGood question, Alan, thanks very much for that. Firstly, it’s still unclear what APMM thinks is core and non-core, even in its T&L unit, in my view. Then, as I mentioned in the story, because it might need the cash and Damco has always been a laggard in its portfolio, among other things. That’s one way to look at it.
Dawid
April 18, 2018 at 8:25 amInteresting speculation Alessandro 🙂
Same question came to my mind Alan. At first thought i doubted that could have any logical sense for Maersk other than cash flow. On the other hand, if you think of integrated TSL model by shipping line, it makes sense to integrate forwarding products, such as intermodal, customs brokerage and insurance. But warehousing and distribution, airfreight and supply chain bring no immediate synergies to shipping line. So why not to sell 4PL company and establish a new, pure forwarding unit.
Ale Pasetti
April 18, 2018 at 8:38 amThanks for your contribution, Dawid.
If you combine what I wrote in the article with the the two comments here, it should be clear what kind of synergies I predict for APMM/HL after a Damco deal, but you are absolutely right, that would not be the main driver of a tie-up.
I am not sure I understand what you mean here:
“So why not to sell 4PL company and establish a new, pure forwarding unit.”
You mean APMM could do that (a spin-off?)?
Thanks for stopping by.
brian
April 17, 2018 at 9:48 pmMight look like a possibility to an outsider but APMT/Damco and Maersk Line are the future of APM as a team. Ralf HJ already had a shot at Damco and it didn’t go so well, can say he really knows what doesn’t work. Would think that Hapag would be concerned to even have this story out there since they are so heavily reliant on the large German/European FF’s for their very existence. What Maersk went through last year with the cyber attack would have killed most companies never mind just denting their balance sheet.
Ale Pasetti
April 18, 2018 at 7:51 amThanks for your valuable feedback Brian. We might have to agree to disagree, though.
Maersk has done very well promising structural changes, but has been poor in terms of execution. As a matter of fact, what Maersk went through last year with the cyber attack happened to Maersk and not to many other companies in the T&L industry, and then when you think of FedEx (just to name a big T&L player that had similar problems), the cyber issue was much better managed. The family doesn’t understand how the different units should be run and what kind of managers Maersk needs to be a successful restructuring story. This has been the case for decades, so it doesn’t surprise me, but as billions of assets are shed there remains little fat on the bone and hey — this reminds me a lot GE, a company in an existential crisis, whose corporate structure has contributed to destroy value for years.
Finally, to your point that, “as a team. Ralf HJ already had a shot at Damco and it didn’t go so well”… you should acknowledge that he took over in the aftermath of the biggest financial crisis of this century, so it was never meant to be easy. Thanks for stopping by.
Nk
April 18, 2018 at 10:49 pmIs there a possibility of acquiring Damco by Hapag Lloyd or Hapag Lloyd may introduce a new freight forwarding unit separately ??
Ale Pasetti
April 19, 2018 at 8:44 amGood one, Nk. I guess we can speculate about both scenarios, but it would be easier to buy (M&A) rather than build, given the replacement value of FF assets of a certain size, although there are caveats including the risk that a buyer might lose some contracts already secured by the target. Some of the market participants (in the trade) I talked to have minimised this aspect as a potential side issue, particularly if some of the major shippers, rather than the leading carriers, ever decided to add freight forwarding services to their mix. Thanks much for your question.
Sumeet
April 21, 2018 at 2:41 pmI agree the family doesnt really understand the paradigm shift in business and has placed trust in wrong hqnds . Maersk is too much of an old boys club to even survive leave alone disrupt an industry .
Ale Pasetti
April 22, 2018 at 9:55 amThanks for your comment, Sumeet.
Andreas Kout
April 22, 2018 at 7:19 amDamco is still too close to Maersk if you speak with either former Damco managers
or manager familair with Damco.Focus of Damco still lies more on ocean thanr air-and is not balanced out, so in our mind interesting if you need economies of scale in terms of buying power on ocean,air they really lack volumes. The neutral aspect in terms of sales approaches to industry customers should not be underestimated too, additionally Damco is not really a very promising freight forwarder if you look financial results ad in particular to EBITA.
Its not really complicate from the competition side to sell Damco as a part of Maersk, a shipping line raising eyebrows with shippers.Have a more closer look
which volumes Damco still materializes with Maersk its still more than 60% not really convincing.
A.Kout
Akclimited
Ale Pasetti
April 22, 2018 at 10:04 amInteresting views, A.Kout. Re “and is not balanced out,” — yes and no, Damco ranks 20th in air and 10th in sea freight, and where it lacks volumes it enjoys plenty of growth. As far as your view that “Damco is not really a very promising freight forwarder if you look financial results ad in particular to EBITA.” –> Damco a couple of years ago found a way to address a poor financial performance, but then another management reshuffle took place and we all know how it’s gone so far…
What do you mean with this? “Its not really complicate from the competition side to sell Damco as a part of Maersk, a shipping line raising eyebrows with shippers.”
Thanks much for your comment, A.Kout.
Alan
April 24, 2018 at 7:12 amCouldn’t the consolidation come the other way round? Kuehne is already a 17% holder, second largest, in Hapag, and the only owner in the register who potentially really wants to be a long term owner. So if there is sense in putting together a forwarder and a shipping company, that would be the obvious way to go. It is a big question now you have Maersk/Damco, and CMA/CEVA.
Ale Pasetti
April 24, 2018 at 10:31 amAlan, that’s a smart angle as far as building a strategic stake is concerned, but the problem, the way I see it, is that most container shipping companies have rather complex shareholding structures and it is highly unlikely, on that basis, that a container shipping company will ever be fully consolidated by a freight forwarder (FF). Then consider the debt loads that most carriers have on their books, it just doesn’t seem to be viable. Strategically, what would be the benefits? Why would FF want to fully own those assets? FF could see carriers as an attractive income source via dividends, and that could be part of the considerations if FFs plan to build strategic stakes. Thanks for your comment.