CEVA buys CMA CGM’s freight management business as part of strategic shake-up
26 / 11 / 2018
CEVA will buy shareholder CMA CGM’s freight management activities for $105m as part of a wider revision of its strategic plan that will see management at the shipping line take key positions within the forwarder.
CEVA, which launched a transformation project in 2014, said that as well as the acquisition of CMA CGM Log, it would launch a new strategic partnership with CMA CGM and accelerate turnaround efforts with the support of CMA CGM.
Part of this will see CMA CGM veteran Nicolas Sartini appointed as chief operating officer and deputy chief executive of CEVA from January 1.
He has been acting as chief executive of shipping line APL since CMA CGM’s takeover of APL in June 2016.
It is hoped the new measures will help CEVA meet a new 2021 revenue target of more than $9bn, reflecting a 5% average annual organic growth and the contribution of CMA CGM Log of $630m.
Management expectations for adjusted EBITDA by 2021 have also been increased from $380m to $470-490m.
The deal for CMA CGM Log will see CEVA pay $105m in cash and is subject to regulatory approvals, due diligence and a consultation processes. Closing of the deal is expected in the second quarter of 2019.
CMA CGM Log expects to generate revenues of $630m and an EBITDA of $16m. The company has 1,200 employees in 32 countries via directly-owned entities and has cooperation agreements in 26 additional countries.
The integration of CMA CGM Log is expected to add around 170,000 teu of ocean container traffic as well customs clearance, carrier haulage and airfreight forwarding revenues.
The revised management expectations rely on the following three key initiatives:
• Accelerate CEVA’s transformation by leveraging CMA CGM’s operational and commercial expertise and benefit from cross-selling opportunities
• Leverage CMA CGM’s platform to generate cost efficiencies in terms of back-office optimization
• Strengthen CEVA’s footprint in Ocean Freight Management through the acquisition of CMA CGM’s Freight Management activities (CMA CGM Log).
CEVA will cross-sell with CMA CGM, focus on the value-add segments like cold chain logistics and LCL (Less Than Container Load), develop fast-growing sectors (e-commerce, retail) organically and penetrate new geographic areas with strong growth potential (Asia, Middle East, Africa)
CEVA’s management will be “re-enforced” with some of CMA CGM’s managers to help with the company turnaround.
The partners will also strive for process improvements, reduce costs, share service centres across functions and geographies and accelerate the deployment of IT tools, such as warehouse management systems and terminal management systems.
Back-office function synergies have been already identified, including savings on current outsourcing contracts, transfer of functions to shared service centres and more efficient billing and cash collection.
On the procurement side, savings on services and consumables are also expected to contribute to savings.
CEVA Logistics chief executive officer Xavier Urbain 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.
“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.
“I am very happy to welcome Nicolas who has successfully turned around the APL shipping company as my deputy and chief operating officer.”
In October, CMA CGM raised its stake in CEVA Logistics from 24.99% to 33% of company shares following the failed takeover approach for CEVA by Danish logistics giant DSV.
Update on the Public Tender Offer
CMA CGM has published its pre-announcement for the Public Tender Offer on CEVA shares. CMA CGM will offer to CEVA shareholders to either:
· Remain invested in CEVA, capturing the expected significant value creation potential embedded in the new strategic plan or
· Exit in the context of CMA CGM’s public tender offer at a value of CHF 30 per share in cash.
Publication of the prospectus including the report of the board of directors of CEVA, which will include its recommendation to all shareholders, is expected in mid-January 2019.
"It is CEVA’s and CMA CGM’s objective to maintain CEVA’s listing on the SIX Swiss Exchange with a significant free float and with governance principles in line with best practices for Swiss listed companies. The Public Tender Offer process is expected to close in April 2019," the companies said.