Panalpina says its chief shareholder will not sign off on offer to be acquired by DSV

While the outcome had been predicted in industry circles, the verdict that Basel, Switzerland-based global 3PL and airfreight forwarder Panalpina will not be acquired by Hedehusene, Denmark-based global 3PL DSV is now official.

That was made clear in a statement issued by Panalpina on February 4.

“Panalpina confirms that the Ernst Göhner Foundation, Panalpina's largest shareholder representing approximately 46% of the total share capital, informed the Board of Directors that it does not support the current non-binding proposal from DSV and that it supports Panalpina’s Board of Directors in pursuing an independent growth strategy that includes M&A,” the company said. “According to its fiduciary duties the Board of Directors of Panalpina continues to carefully review the situation with its professional advisers. Further announcements will be made as appropriate.”

Last month, DSV confirmed that it made “an indicative and private proposal” to the board of directors of Panalpina for more than $4 billion, which was comprised of cash and DSV shares. DSV said at that time that 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.

DSV had also acknowledged that a combination of DSV and Panalpina would have created 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.

But a research note written by Stifel analyst Bruce Chan on January 23 explained how “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 Kuehne + Nagel (K+N), a company that he noted also actively pursued Panalpina, and a deal there could make sense from a cultural standpoint, as many current Panalpina executives are former Kuehne Alumi. He added that DSV’s interest in acquiring Panalpina came around three months after it made a $1.5 billion bid for CEVA Logistics.

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.

Like Stifel’s Chan, Evan Armstrong, president of supply chain consultancy Armstrong & Associates, told LM that this development was anticipated, even though it made very good strategic sense.

“It would have advanced DSV from the sixth largest global 3PL to the fourth largest based upon our 2018 top 50 global 3PL list and would have provided DSV with more opportunities to cross sell integrated solutions and drive better buy-side purchasing power with carriers from its greatly expanded freight forwarding volumes,” he explained.

“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 have benefited from upgrading to DSV’s I.T. platform and becoming part of its solid corporate culture.” 

Armstrong said that with DSV and K+N out, it looks like Panalpina will look for higher offers, or continue to go it alone.

“Let’s see what it does on the M&A front,” he said.