DSV to buy UTI for $1.35bn

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DSV has signed an agreement to acquire US-based UTi Worldwide in a deal that values UTi at around US$1.35 billion and will add around 50% to the European forwarding and logistics group’s annual revenue and scale and turn it into a significant global player.

The announcement ends months of speculation after the two companies revealed earlier this year that they had held preliminary talks.

Analysis indicates that the addition of UTi will transform DSV into a ‘top 10’ global air freight forwarder, with its annual air freight volumes managed more than doubling to in excess of 600,000 tonnes.

California-headquartered UTi is a global supply chain services and logistics company with revenue of US$3.9 billion and 21,000 employees in 58 countries, although it has struggled financially in recent years and has been undergoing restructuring to turn around recent loss-making performances. DSV said the combined company would operate “one of the world’s strongest transport and logistics networks”.

The transaction is expected to close in the first quarter of 2016. Following the merger, UTi will become an indirect wholly owned subsidiary of DSV.

Kurt Larsen, chairman of the board of DSV, commented: “We complement each other perfectly, both in terms of business activities and geography. Together, we will be even stronger and able to capitalise on business synergies as well as a greater global reach to the benefit of shareholders, customers and employees.”

Roger MacFarlane, chairman of the board of UTi and a co-founder of the company, commented: “We are operating in an industry where increasingly scale is critical. Joining forces with DSV delivers substantially greater client value and many future opportunities for our people while it is financially very attractive for our shareholders.

Commenting on the strategic rationale, DSV said: “Acquisitions are an integral part of DSV’s growth strategy, and DSV has a strong track record of successful integration of acquired companies. The acquisition of UTi is expected to increase DSV’s annual revenue by approximately 50%, creating one of the world’s strongest transport and logistics networks.”

The company said the two companies’ combined 2014 revenue amounts to approximately US$13 billion (DKK 75 billion) and the combined workforce will grow to 44,000 people in 84 countries, 848 offices and 339 logistics facilities.

“The Air & Sea Division will be significantly strengthened, and DSV will increase its industry specific capabilities across all divisions,” DSV said. “Furthermore, DSV will now be truly global within contract logistics and expand into road freight activities outside Europe. This will enable the company to offer its customers a broader range of services.”

It said the combined companies will have a more balanced geographical footprint with approximately 61% of revenue in Europe, Middle East and North Africa, 17% in Americas, 16% in Asia (APAC) and 6% in Sub-Saharan Africa.

DSV said the two companies were “a strong match, with many potential synergies as a result of similarities in business models and services”. These included: Commercial synergies from stronger network and service offerings, new competencies and skills; Consolidation of offices and logistics facilities; Consolidation of IT infrastructure; Optimisation of organisational setup; And stronger buying power.

UTi has a strong presence in North America and a leading position in South Africa, also operating an extensive network in Asia-Pacific and Europe. In the 12 months ending 31 July 2015, UTi achieved consolidated revenues of US$ 3.9 billion and an adjusted EBITDA loss of US$6 million. Its Freight Forwarding and Contract Logistics & Distribution segments reported revenues of more than US$2.5 billion and US$1.4 billion, respectively. As a result, UTi is a global top 20 third party logistics provider.