Ceva hikes forecast of return on acquisition of CMA CGM's freight management arm

Dutch third-party logistics (3PL) giant Ceva Logistics AG has unveiled a three-part strategic plan to accelerate its top-line growth and improve profitability, centered on the company's tight relationship with CMA CGM S.A., the French container shipping line that is Ceva's major shareholder and strategic partner.

Under the three-point plan, Ceva says it will: accelerate its turnaround efforts with the support of CMA CGM's corporate transformation expertise, leverage CMA CGM's overall platform to accelerate revenue growth, and complete the acquisition of CMA CGM's freight management arm, Ceva said today.

Ceva disclosed that it had paid $105 million for CMA CGM's freight management arm, known as CMA CGM Log, and expects the acquisition to close in the second quarter of 2019. The firm had first announced that deal in October without sharing the price tag, but now says the acquisition is expected to contribute $630 million to Ceva's 2021 revenue target of $9 billion.

Thanks in large part to that financial impact, Ceva also updated its operating performance forecast for 2021 from $380 million to $470-490 million, as measured by adjusted earnings before interest, tax, depreciation, and amortization (EBITDA).

CGM Log supports that vision by offering a significant presence in high-growth markets including India, China, Australia, and the U.S. Integrating CMA CGM Log into the CEVA Freight Management Business line is expected to expand CEVA's footprint in the ocean freight management sector by allowing it to control more twenty-foot equivalent units (TEUs) and add to its product offering in the field of Sea FCL (full container load) and LCL (less than container load), customs clearance, carrier haulage, and air freight forwarding, Ceva said.

Altogether, the updated plan will intensify Ceva's business relationship with CMA CGM while keeping an arm's length in governance, Ceva said. The excutive charged with managing that relationship will be Nicolas Sartini, who has been appointed as chief operating officer (COO) and deputy CEO as of Jan. 1, 2019, Ceva said.

"With the support of our strategic partner CMA CGM, I am proud to open a new chapter for CEVA Logistics and announce that we can accelerate our transformation and turnaround action plan in the next three years and beyond," CEVA Logistics CEO Xavier Urbain said in a release. "This can be achieved by a combination of our commercial and sales focus, cross selling with CMA CGM customers, our own productivity actions, the integration of CMA CGM Log within CEVA and sharing resources with CMA CGM in the field of procurement and administrative functions."

The updated strategy is the latest step in a journey that began in 2014 when CEVA launched its financial transformation plan, saying it was renewing its commitment to strengthen its approach to new business development, transform its IT infrastructure, and improve the company's operational performance and productivity through increased standardization and streamlined processes.

Most recently—at the time of its initial public offering (IPO) in April—CEVA was just halfway through that journey, the firm says. The adjusted strategy now continues to move toward the same goal by aligning Ceva's profile with CMA CGM's strategy of offering end-to-end logistics solutions to its customers, while retaining an arm's length business relationship between the two firms, Ceva said.