DSV in unsolicited $4bn bid for Panalpina

Danish logistics giant DSV has made an unsolicited bid to acquire Switzerland-based Panalpina in a SFr170 per share offer that values the rival freight forwarder at around $4bn.
Based on 2017 figures (the latest available), the move would create the world’s second largest airfreight forwarder (see chart at end of article) with 1.6m tonnes processed each year.
In terms of revenues it would be ranked number four with $17bn in takings registered by the two in 2017.
The takeover offer, creating a $16.8bn turnover logistics giant, comes after DSV failed in October last year to acquire Switzerland-based CEVA Logistics in a similar unsolicited bid which valued CEVA at around $1.6bn.
DSV’s indicative proposal will provide Panalpina’s shareholders with a premium of 24% to Panalpina’s closing share price of SFr137.5 as of January 11 and 31% to the 60-day volume weighted average price  (VWAP) of SFR129.5.
In a statement this morning Panalpina said: "The Board of Directors of Panalpina announces that it has received an unsolicited, non-binding proposal from DSV to acquire the company at a price of SFr170 per share, comprising a mix of cash and DSV shares.
"According to its fiduciary duties, the Board of Directors of Panalpina is reviewing the proposal in conjunction with its professional advisers. Further announcements will be made as appropriate."
DSV countered with a lengthy statement: "We can confirm that DSV has made an indicative and private proposal to Panalpina’s Board of Directors to acquire Panalpina.
"The consideration consists of 1.58 DSV shares and SFr55 in cash for each Panalpina share. Based on closing prices as of 11 January 2019, the value of the offer is SFr170 per share.
"We have not yet received a response to our indicative and private proposal from Panalpina’s Board of Directors."
The Danish company said that a combination of DSV and Panalpina "would create a leading global transport and logistics company with significant growth opportunities and potential for value creation".
It continued: "A combination presents a unique opportunity for both companies and their respective stakeholders including shareholders, employees, customers and suppliers."
DSV added that the combined business would generate expected revenues of more than DKr 110bn ($16.8bn) and EBITDA of more than DKr7bn ($1.07) on a pro-forma 2018 basis (excluding any synergy benefits).
“The structure of our offer will allow Panalpina’s shareholders to participate in the benefits of the combination.
“DSV has a long and successful track record of partnering with companies, and the combined business will be exceptionally well positioned for future growth.
“We provide and manage supply chain solutions for thousands of companies every day – from the small family run business to the large global corporation.
“Our reach is global, yet our presence is local and close to our customers. 45,000 employees in more than 80 countries work passionately to deliver great customer experiences and high quality services.”
The fact that DSV is testing the water with Panalpina shouldn’t come as too much of a surprise.
DSV’s move for CEVA shows the Danish forwarder is keen to make a game-changing acquisition, while  a shareholder attack led to Panalpina chief executive Peter Ulber last year announcing that he was leaving the role.
One of the reasons given by the shareholder for their dissatisfaction with Ulber was that he was "categorically rejecting approaches from competitors regarding mergers and co-operation".
Meanwhile, Kuehne+Nagel was last year rumoured to be considering an offer for Panalpina.
Analysts from investment bank Jefferies say the deal implies a takeover multiple of 27.6x 2019 estimated enterprise value/earnings before interest and tax at a 65% premium to the freight forwarding sector.
"We estimate the takeover would be value accretive in year three, with [a] return on invested capital (ROIC) of 11.5%," Jeffries said.
It also said that while other bidders should not be ruled out, DSV is best positioned.
“The takeover of Panalpina would add 50% to DSV’s revenues and 17% to earnings before interest and tax in year one," Jefferies added.
“The takeover sum of Sfr4bn will be funded through a combination DSV shares (1.58 DSV share for each Panalpina share) and cash (Sfr55 for each Panalpina share).
“As a result, we estimate DSV will make a capital increase of 20.6% to raise DKK17.8bn in new equity.
“The cash component of Sfr55 per Panalpina share translates into estimated debt funding of DKK8.6bn.
“We estimate the takeover would be value neutral in year two, with an estimated return on invested capital of 7.5%, increasing to 11.5% in year three, when we expect the full amount of synergies to be realised.”