Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Brad Jacobs is shopping in Europe, and he has brought the big wallet.
Jacobs, the founder, chairman and CEO of freight broker and third-party logistics provider XPO Logistics Inc., announced last night one of the most ambitious bets in the 3PL industry's history by acquiring French transport and logistics giant Norbert Dentressangle S.A. for US$3.53 billion in cash and debt. The acquisition, the largest of Jacobs' acquisitive three-decade career spanning multiple industries, catapults Greenwich, Conn.-based XPO into the global big leagues by taking out one of the continent's most visible logistics operators.
Under the deal's terms, founder Norbert Dentressangle will sell his family's 67-percent ownership in the Lyon, France-based company for 217.50 euros per share. XPO will then tender for the balance of Dentressangle shares at the same price. The deal's value represents a 37-percent premium to Dentressangle's April 27 closing price.
Not since Deutsche Post DHL's US$6.7 billion purchase of the U.K. contract logistics provider Exel in 2005 can anyone remember a deal this large that involved a mostly nonasset-based provider. Dentressangle's capital expenditures equal just 2.5 percent of revenue, meaning its "asset intensity" is low, according to XPO.
The deal, slated to close by the end of June, will push XPO's annualized revenue to $8.5 billion, about two years ahead of its initial timeline for hitting that mark, the company said. Hervé Montjotin, Dentressangle's chairman and CEO, will become CEO of XPO's European business and president of the parent company, XPO said. Dentressangle will retain its Lyon headquarters, and XPO has pledged to keep all of the company's full-time employees for at least 18 months from the deal's closing date.
The Dentressangle name, which has been around since 1979, will disappear once the deal closes, and the business will be known as XPO Logistics. Jacobs said in an interview late last night that all of XPO's operating companies that have been known by other names, such as XPO Last Mile for its last-mile delivery business, have been rebranded under the XPO Logistics name.
In Dentressangle, XPO acquires a company that, in Jacobs' words, "is a mirror image of our own, only in Europe." Of Dentressangle's US$5.5 billion in 2014 revenue, about $2.7 billion comes from contract logistics (a somewhat fancy term for warehousing); $1.2 billion from freight brokerage; and $1.1 billion from company-owned, independently operated, and dedicated over-the-road trucking services. The balance comes mostly from air- and ocean-freight forwarding.
Retail and Fast Moving Consumer Goods (FMCG) customers account for 70 percent of Dentressangle's contract logistics business, according to Armstrong & Associates Inc., a consultancy. Dentressangle is also a leader in the handling of bulk and temperature-controlled goods, with 3.9 million cubic meters of temperature-controlled storage volume under foot, Armstrong said.
Both companies have been acquisitive, and have leveraged their dealmaking to expand into virtually all areas of logistics. For example, XPO was founded in 2011 with the objective of building footprints in brokerage, freight forwarding, expedited transport, and intermodal. Since then, it has expanded into contract logistics, transportation management, and last-mile deliveries, and gotten deeper into intermodal than Jacobs originally envisioned with its 2014 purchase of Dublin, Ohio-based Pacer International.
Jacobs said in the interview that XPO's penetration into other segments was driven by his desire to be a "comprehensive solutions provider," and by demands from shippers in the U.S. and abroad to work with a smaller universe of vendors with a myriad of service offerings integrated under one roof.
The U.S. accounts for about 26 percent of Dentressangle's contract logistics business, most of which came from its $750 million acquisition last July of Des Moines, Iowa-based Jacobson Cos. Jacobs said XPO became interested in Dentressangle after finishing second in the bidding for Jacobson. "We wanted to know more about who beat us," he said. After researching the company, Jacobs said the fit between the two firms was so compelling that he sought to begin talks in earnest.
The deal was finalized in the past two weeks during round-the-clock negotiations, Jacobs said. The strengthening of the U.S. dollar against the euro proved a tailwind, making XPO's purchase price about 20 percent cheaper than it would have been a year ago. "We are buying at an opportunistic time," Jacobs said. He added, though, that the bigger bang for the acquisition buck was "just a side benefit."
XPO gets a foothold in a region that is roughly twice the size of the U.S. market, and perhaps more importantly, is in the early stages of outsourcing logistics activities. Jacobs estimated that only about 27 percent of European firms currently outsource their logistics work. XPO also said it would gain traffic density on road lanes covering about 90 percent of the Eurozone's GDP-producing regions.
Jacobs' pivot to Europe comes on the heels of XPO losing out on several attractive bids. Besides the Jacobson deal, it saw Singapore-based 3PL provider APL Logistics fall into the hands of Japanese giant Kintetsu World Express—thwarting Jacobs' desire to establish a foothold in the trans-Pacific market--and, most recently, Command Transportation LLC—a Chicago-based truckload broker that Jacobs coveted—acquired by Echo Global Logistics Inc.
Jacobs has said he will not overpay for a potential asset no matter how desirable, and it is believed the winning bidders in those deals went to levels that XPO would not match. Dentressangle was purchased at a multiple of 9.1 times projected 2015 earnings before interest, taxes, depreciation, and amortization (EBITDA). In today's M&A environment, that is considered a reasonable multiple for a well-regarded 3PL.
John G. Larkin, lead transport analyst for investment firm Stifel, Nicolaus & Co., said in a note last night on the Dentressangle deal that "we, and most others we suspect, were not thinking of European companies as acquisition targets, and we were not contemplating companies of this size."
In the interview, Jacobs said XPO had been "quietly talking" to other European companies about possible tie-ups. Now, with a highly visible asset like Dentressangle in tow, those conversations will likely take on more intensity, he said.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.