Large liner companies made big deals to diversify beyond sea freight
For big ocean freight lines, 2021 was marked not only by record profits stemming from Covid-related constraints on shipping patterns and capacity but by significant steps toward transforming themselves into full-blown providers of inland logistics services. The trend is further blurring the line between freight forwarders and carriers.
For most of this century, an asset-light business model dominated the logistics sector. Leasing warehouses, trucks, and aircraft and using contract labour-maintained flexibility and minimized capital expenditures, allowing for faster return on investment and higher corporate valuations.
But the supply chain crisis — and the growth of Amazon’s logistics network — has clearly demonstrated the value of controlling capacity rather than being completely reliant on third parties with mixed priorities and capabilities to make on-time deliveries, according to a report by Freightwaves.com.
Many container lines established logistics divisions years ago, but they mostly focused on short-haul port drayage, transloading or intermodal moves. In 2021, the major carriers invested heavily in becoming integrated logistics supermarkets from which customers can order individual services, such as customs brokerage or port-to-port transportation or bundled solutions from an end-to-end international supply chain management menu that includes last-mile delivery to a consumer’s doorstep. Many acquisitions made by the shipping lines were aimed at increasing capabilities and scale in the e-commerce sector, which is growing at double-digit rates.
Some carriers also invested in port terminal operations to better guarantee access and prompt handling for their vessels.
Top M&A activities:
- The largest container line in the world has been pursuing a comprehensive logistics strategy for years and went deeper in 2021. Maersk announced before Christmas that it had inked a US$3.6 billion deal with Hong Kong sourcing expert Li & Fung for its LF Logistics subsidiary. LF Logistics significantly expands Maersk’s warehousing and distribution footprint in the Asia-Pacific region, as well as its e-commerce fulfilment capability.
- In early November, it agreed to acquire German freight forwarder and airfreight specialist Senator International for US$644 million. The purchase is expected to double Maersk’s air cargo volume. At the end of 2020, Maersk dissolved its freight forwarder brand Damco and rolled its air and less-than-container load product into the Maersk logistics brand.
- Maersk ordered two new Boeing 777 freighters for its in-house airline Star Air and leased three Boeing 767-300s, starting in 2022.
- Acquired in August e-commerce logistics companies Visible Supply Chain Management, of Salt Lake City, and Netherlands-based Europe B2C in deals worth a combined US$924 million. Earlier it bought a company called HUUB.
- The French ocean shipping firm in December announced a US$3 billion deal for the e-commerce and life cycle units of technology distribution giant Ingram Micro. The assets will be combined with those of Ceva Logistics, the contract logistics firm it acquired in 2019 and is operating as a more of a stand-alone business. When the deal closes during the first half of 2022, Ceva will become the world’s fourth-largest contract logistics provider, with 1,100 locations in 160 countries.
- Launched an all-cargo airline after purchasing four used Airbus A330-200 freighters. CMA CGM Air Cargo flights are operated by crews from Air Belgium. The company has since added a fifth A330 and service destinations such as Atlanta, Chicago, New York, Istanbul, Beirut and Dubai, United Arab Emirates. CMA CCM Air Cargo ordered two new Boeing 777 freighters for delivery in the spring of 2022 and recently signed a preliminary purchase agreement for four Airbus A350 widebody cargo jets.
- Acquired the remaining 90% ownership stake in the Fenix Marine Services terminal at the Port of Los Angeles for US$2.3 billion. FMS is the third-largest terminal in the Los Angeles/Long Beach port complex and can handle about 2.5 million twenty-foot equivalent units annually. The company currently has investments in 49 port terminals in 27 countries through two subsidiaries: CMA Terminals and Terminal Link.
- Mediterranean Shipping Co. is nearing completion of a transaction to buy Log-In – Logística Intermodal SA, which operates coastal vessels, as well as port and intermodal terminals in Brazil and lower South America. It’s a tiny ocean carrier at 15,462 TEUs of vessel capacity but would enable MSC (4,256,172 TEUs) to inch past Maersk as the largest container line, according to calculations by container shipping expert and Vespucci Maritime CEO Lars Jensen based on rankings by Alphaliner.
- Last week, it made an offer to acquire the Africa division of Bolloré Group, the France-based third-party logistics provider, for US$6.7 billion. MSC already has a logistics arm called MedLog, which provides inland truck, rail, and barge transportation for customers with door-to-door delivery contracts.
- The Singapore-based global port operator recently agreed to buy BDP International, a logistics provider headquartered in Philadelphia. PSA has been offering non-port logistics services for several years, but BDP is its first purchase of a global third party logistics company.