French third-party logistics (3PL) firm Norbert Dentressangle, making its first major push into the U.S. 3PL market, said today it will acquire Jacobson Co., a contract logistics, transportation management, and packaging provider from its majority owner, private equity firm Oak Hill Partners, for $750 million in cash and debt.
The transaction, set for completion around mid-September, marks the second big transaction this week in the fast-growing contract logistics segment, where providers offer warehousing and distribution services to companies on a contractual basis and deliver transportation management solutions under that umbrella. On Tuesday, XPO Logistics Inc. said it would buy New Breed Logistics for $615 million in debt, a move that continues to broaden XPO's operations beyond its core freight brokerage business. XPO also bought Atlantic Central Logistics—which provides "last mile" services delivering heavier weighted goods like appliances and desks from distribution centers and stores to residences, businesses, and job sites—for $37 million in cash.
The Dentressangle-Jacobson deal also represents one of the largest acquisitions in years of a U.S. 3PL by a European counterpart. The last deal of similar significance occurred in the fall of 2005 when German logistics giant DHL Deutsche Post bought Exel, which at the time was a contract logistics firm based in Westerville, Ohio; following the acquisition, the Exel brand was retained for North America. Perhaps ironically given the Dentressangle-Jacobson deal's focus on so-called strategic 3PL relationships, Exel and its sister company DHL Supply Chain said on Monday they have launched a freight brokerage operation, which is almost exclusively a transactional business, serving the U.S., Canada, and Mexico.
Dentressangle said the Jacobson acquisition should boost annual revenue approximately 15 percent to about US$6.8 billion.
Founded in 1979, Lyon-based Dentressangle has grown into a US$5 billion a year concern with its sales roughly split between those contributed by acquired companies and those from organic growth. However, about 97 percent of Dentressangle's business is conducted in Europe, according to HervÃ© Montjotin, its president. Its U.S. revenue is a mere $30 million, which comes from business generated by a 2010 acquisition of Schneider Logistics' freight forwarding operations in the U.S. and China. Worldwide, Dentressangle is involved in the warehouse-based logistics, freight forwarding, and transportation segments.
Jacobson, based in Des Moines, Iowa, generates about 70 percent of its $850 million in annual revenue from contract logistics, according to estimates from Armstrong & Associates, a U.S. consultancy. The food and beverage vertical is Jacobson's largest, generating about 41 percent of revenue, Armstrong said. The two companies are strong in such verticals as food and grocery, consumer packages goods, and retail, said Evan Armstrong, president of the consultancy.
About 84 percent of Jacobson's U.S. warehouse network is dedicated to a specific customer, with the remaining warehouses shared by multiple users, according to estimates from Transport Intelligence, a U.K. consultancy. About half of Jacobson's business is in the Midwest, with a quarter of its revenue generated by transportation management services usually linked to dedicated warehousing contracts, the consultancy added.
Thomas Cullen, an analyst for Transport Intelligence, said he was somewhat surprised by the announcement because Dentressangle had previously indicated it was looking to buy freight forwarding companies. Dentressangle has 57 forwarding offices in 14 countries, according to Armstrong data.
In a phone interview, Montjotin said the U.S. market is growing faster than Europe's, and there is more logistics outsourcing activity in the United States than in Europe. He added that about half its customer base is either headquartered in the U.S. or trades with the U.S. market.
Dentressangle's acquisition spree began in earnest in late 2007, when it acquired Christian Salvesen, a European transport and logistics firm with Norwegian roots dating back centuries. From 2010 to 2013, it acquired various firms that expanded its reach within Britain, France, Russia, and China.
Dentressangle has no near-term plans to expand in the United States beyond the Jacobson deal, according to Montjotin. "We need to understand the U.S. market and learn from the U.S. market," he said.
Montjotin added that it would be "somewhat arrogant" for Dentressangle to declare that it was in acquisition mode in the United States so soon after buying Jacobson and working to build relationships with its customers. Top Jacobson executives are expected to remain with the company after the transaction closes, he said.
Also today, Dentressangle posted first half 2014 results which showed a 19-percent increase in logistics revenue compared to the same period in 2013. The company reported a 13.4-percent year-over-year revenue gain across all its businesses. The gains were attributed to a pickup in the European economy and increasing demand for Dentressangle's services, the company said.