Two announced acquisitions this week involving global ocean container shipping lines add further evidence of moving forward with strategies to integrate added transportation and logistics services beyond just port to port. Many others will likely follow.
We have predicted in 2018, and now in 2019, that the global transportation and logistics industry will continue to undergo a transition to the formation of one-stop providers of broader scope services, facilitated by advanced technology. The transition includes the involvement of global carriers, third-party logistics and services providers, or indeed some major retailers such as Amazon. The mechanisms are being enabled by either acquisitions, expansion of existing services into adjacent areas, or combinations of both.
This week provided yet more evidence of such actions that are underway:
French based ocean container carrier CMA CGM announced this week that the carrier is now pursuing full control of Swiss-based Ceva Logistics in a deal that is valued at $1.7 billion. Ceva has been ranked among the top ten largest third-party logistics (3PL) services firms by revenue across Europe.
This full takeover plan, first announced in the Fall, was cleared by the European Commission this week, and generally endorsed by Ceva’s board of directors as a friendly takeover that adds value for shareholders.
CMA CGM previously invested more than $460 million in Ceva convertible securities to secure a prior minority business ownership interest. Ceva subsequently turned down a counter buyout offer by Danish based logistics provider DSV A/S in October of last year, that reportedly matched the French shipper’s price.
Privately-held CMA CGM has indicated that it will plan keep Ceva as a listing in the Zurich exchange.
Reports indicate that CMA CGM’s existing logistics arm that consists of 1,200 employees will be subsequently merged with that of Ceva is the full deal is consummated. The opportunity is to form a logistics services business with a combined staff of upwards of 100,000 employees.
As business media is reporting, global shipping lines are seeking to broaden services and added revenue opportunities beyond the scope of port to port transport, incorporating inland logistics and delivery services in one offering.
Supply Chain Matters had previously highlighted in early January the declaration from ocean container shipping leader Maersk Line’s intent to look toward added acquisitions in the area of broadened logistics services. The CEO of Maersk had told Europe’s business publication the Financial Times that the next few years will feature a strategy for diversifying parts of its business through tuck-in acquisitions beyond just global shipping. That included areas such as inter-modal surface transportation as well as operating warehouses. Specifically indicated in the interview was scaling the land side of Maersk’s business model.
In that same vein, this week, the shipping giant announced the acquisition of New Jersey based customs broker Vandergrift Inc. in an effort to broaden land-based logistics services. Terms of the deal were not disclosed.
Here again, Maersk stands to reportedly double its existing North America based customs brokerage services, but also gain added technology prowess.
Vandegrift’s focus is on customs brokerage, trade compliance and global logistics among 11 locations in the US, Canada and Hong Kong. The company claims to be the industry leader in advanced technology automation to include customized programming to help any client integrate with any existing shipping network platform, custom EDI integration programming services and the ability of clients to establish automated reporting and tracking.
A Maersk executive told The Wall Street Journal that the attraction of Vandergrift were its capabilities in areas where Maersk currently lacks today.
Once again, industry supply chain management teams will have to both monitor such ongoing activity to assess the industry implications, and to eventually make some strategic choices as to where the end-state is headed, and which options provide the best opportunities for enhanced customer service, while delivering meaningful cost savings that simplify today’s hand-off complexities.
With the ocean container industry’s new reliance on a larger mega-ship dominated fleet with multi-line consortium managed shipping scheduling, the implication will be higher volume single movements of containers impacting various global ports and associated logistics services. As an example, in five years, the U.S. Port of Savannah has plans to process upwards of 84.000 TEU’s in a single day. Managing and coordinating such volumes will likely require more integrated services and supporting technology, at a lower administrative cost for shippers.
We believe the keys to such choices will revolve around advanced technology enablement of such capabilities, namely which industry participants demonstrate the most proficiency and market timing.
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