How would a combined K+N and Panalpina stack up in terms of air cargo?

Recent events have fuelled market speculation that Kuehne+Nagel could be interested in holding talks with Switzerland-based freight forwarder Panalpina, but what would a tie-up between the two logistics giants look like in terms of air cargo? (see chart at end of article)
The speculation started when Panalpina’s Peter Ulber announced he would not stand for re-election as chairman of the forwarder’s board due to concerns about his independence – he is also on the board of the company’s largest shareholder, Ernst Goehner Stiftung.
The issue of Ulber’s independence had been raised a few weeks earlier when another major shareholder, Cevian Capita’s co-founder Lars Forberg, spoke to Bilanz magazine about the issue and also Panapina’s performance in general.
In the same article, he also criticised Ulber and vice chairman, Beat Walti, who is also on the board of Ernst Goehner, of categorically rejecting approaches from competitors regarding mergers and co-operation.
The fact that Ulber is now leaving has led to some suggesting that Panalpina could now become a takeover target.
Meanwhile, K+N’s chief executive Detlef Trefzger told newspaper Finanz & Wirtschaft it would be ready to hold talks with Panalpina.
In a recent investor circular, analysts from financial group Jefferies said: “We think Panalpina has become a likely takeover target again, after the chairman, Peter Ulber, [announced he] will not stand for re-election at next year’s annual general meeting following pressure from shareholders to facilitate more active engagement in takeover talks.
“The Ernest Goehner foundation controls a 45.9% stake, but we think patience is running out after the sector doubled over the last five years, while Panalpina remained stable.
“Sector mergers and acquisitions [are] set to pick up after K+N said it is now also looking for larger and transformational [deals].”
Panalpina, for its part, said that it would like to continue to develop independently.
As is often the case with this type of market speculation, it is impossible to say whether a deal between the two companies will ever emerge – remember the Japan Post to takeover DHL Global Forwarding (GF) rumours of a few years ago?
But, at Air Cargo News, we enjoy joining in the speculation and looking at what impact these huge deals could have on the airfreight market.
Based on 2017 figures provided by analyst Armstrong & Associates, if the two forwarders were to come together, the move would create the world’s largest forwarder, with a lead in airfreight volumes (see chart below), revenues and seafreight traffic.
In air cargo terms, the combined entity would have annual airfreight volumes of 2.6m metric tons compared with current leader DHL Global Forwarding’s 2017 volumes of 2.3m metric tons.
You could argue of course that K+N and Panalpina may lose some volume if they come together either through synergy savings, customers leaving, or authorities stepping in on certain territories and demanding the sale of businesses in those countries because of competition concerns.
However, the first three quarters of this year has seen K+N’s airfreight volumes grow by 16% year on year, Panalpina has recorded an increase of 4% but DHL GF has recorded a decline of 4.2%. So the two Switzerland-based firms are growing much faster than DHL.
K+N is already the world’s leading seafreight forwarder so there would be no change in the pecking order on this front, although it would obviously stretch its lead.
Combined revenues would be slightly ahead of DHL at $28.2bn, compared with the German forwarder’s $27.6bn.
Looking at market impact, any merger would likely be good in some respects for shippers, but perhaps not such good news for airlines.
Any deal would create a powerful industry leader with improved buying power, meaning it could put extra pressure on airlines when it comes to contract negotiations.
Meanwhile, shippers would benefit from a wider global network, something of growing importance to international shippers and looking for regional and global transport solutions, and more industry specific expertise and services.
On the other hand there would almost certainly be a rationalisation of offices, while market consolidation could result in the market swinging in the favour of forwarders.