Analyst says Panalpina is likely to reject acquisition bid from DSV

As reported by LM last week, Hedehusene, Denmark-based global 3PL DSV confirmed that it made “an indicative and private proposal” to the board of directors of Basel, Switzerland-based global 3PL and airfreight forwarder, Panalpina, to acquire the company. DSV said it made these comments in response to Panalpina’s January 16 announcement that it received an unsolicited, non-binding proposal from DSV to acquire the company for an offer of roughly $4 billion, which is comprised of a combination of cash and DSV shares.

While DSV acknowledged 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, adding that a combination presents a unique opportunity for both companies and their respective stakeholders including shareholders, employees, customers and suppliers, it now appears that the chances of a deal coming to fruition are less than likely.

That was the take in a research report from Stifel analyst Bruce Chan, with the analyst writing that “media reports indicate Panalpina is likely to reject DSV’s initial bid…and that DSV may be preparing to make another  [higher] offer,” which would be difficult for other potential global 3PL players to match or exceed.

The reason for that, Chan explained, is that other 3PLs are less likely to extract the same value from Panalpina for overlap/attrition reasons and integration execution reasons as well.

Another 3PL that could acquire DSV, according to Chan, is Kuenhe Nagel, a company that has “also actively pursued Panalpina, and a deal there could make sense from a cultural standpoint; many current Panalpina executives are former Kuehne Alumi.”

3PL candidates that Chan viewed as “unlikely” to make a move for Panalpina include: XPO Logistics, despite having $5-$8 billion at the ready for acquisitions as they may be more focused on a buy in the contract logistics space; and C.H. Robinson, as they are looking at smaller “Bolt-on” deals in the forwarding space.

“While other bidders may be tempted from discipline, this deal probably makes the most sense for DSV from a valuation perspective, in our view,” wrote Chan.

DSV has been active on the M&A trail in the past, having acquired UTi Wordwide in October 2015, a company Chan described as “an industry laggard” at the time, due, in large part, to myriad IT-based issues. He added that Panalpina currently has the lowest margins among public 3PLs, and has been “engaged in a multi-year implementation of SAP-TM as its Freight Forwarding TMS.

Evan Armstrong, president of supply chain consultancy Armstrong & Associates, recently told LM that if the acquisition goes through, it would move DSV from the sixth largest global 3PL to the fourth largest based upon Armstrong’s 2018 top 50 global 3PL list.

“Strategically, it would provide DSV with more opportunities to cross sell integrated solutions and drive better buy-side purchasing power with carriers from its greatly expanded freight forwarding volume,” he said. “Panalpina is the fourth largest air freight forwarder and DSV is the tenth largest; combined, they would have over 1.6M metric tons of air freight under management making them the second largest air freight forwarder. In terms of ocean TEUs, Panalpina and DSV are ranked fifth and sixth respectively, the combined operation would bring them to 2.9M TEUs pushing them into fourth place just behind DHL SC & GF. Panalpina’s operations could in-turn benefit from upgrading to DSV’s I.T. platform and solid corporate culture.”