GXO’s acquisition of Wincanton remains on track for completion by late April

The pending acquisition of Chippenham, UK-based Wincanton, a supply chain solutions services provider across myriad vertical markets, by Greenwich, Conn.-based global contract logistics services provider GXO Logistics appears to remain on track, according to a “scheme of arrangement” recently issued by Wincanton.

Wincanton officials explained that a scheme of arrangement is a technical UK legal process used to implement the acquisition of a company, and it added that the acquisition of Wincanton will be subject to, among other things, receipt of Wincanton shareholder approval and certain regulatory approvals.

The Wincanton scheme of arrangement also stated that the acquisition is expected to take effect “on or around” April 29.

As previously reported by LM, in late February GXO made a $965 million cash offer to acquire Wincanton. GXO’s offer to acquire Wincanton followed a $764.3 million offer made by CEVA, a subsidiary of France-based global ocean carrier CMA CGM, also in late February, which followed an initial offer made in January for $716.5 million, noted a Wall Street Journal article. The article added that: “Wincanton earlier this week said it was considering a rival proposal and that was sticking with its recommendation of Ceva’s bid.”

But that sentiment appeared to have shifted, with Wincanton saying on March 1 that the company’s Directors “welcome” GXO’s announcement, adding that they “are pleased that the public offer process, triggered by their recommendation of CEVA Bidco’s offer…is maximizing value and delivering a significant premium to Wincanton Shareholders.”

Wincanton went on to say that the Wincanton Directors intend to recommend unanimously the GXO Offer and withdrew their recommendation of the increased and final cash offer by CEVA Logistics.

“The Board has long been convinced of Wincanton's significant inherent value and the management team has successfully reshaped the business, ensuring it is positioned at the forefront of the UK's logistics industry,” said Sir Martin Read CBE, Chairman of Wincanton, in the scheme of arrangement. “While remaining confident in the long-term prospects of Wincanton, the Board was clear that the strong performance of the Company had failed to be reflected in its share price. The Directors therefore believed that it was in the best interests of shareholders to recommend the offer from CEVA Logistics which represented a very substantial premium to the share price. The Board was conscious that this public recommendation would create the opportunity for other interested parties to come forward and this has led to the further maximization of value for shareholders. GXO's improved offer underscores the strength of Wincanton's business and prospects.”

And Malcolm Wilson, GXO CEO, said that GXO implementing its acquisition by means of a Scheme of Arrangement marks a significant step forward, adding that the company’s offer for Wincanton reflects the value it sees in both the business and its talented team, as well as what GXO believes Wincanton can achieve as a part of GXO.

“Given our long heritage in the UK and the complementary cultures of both businesses, we are confident we will accelerate the collective growth of both companies,” said Wilson. “Our proven integration blueprint will facilitate a seamless transition for customers, while creating high value jobs and enhancing the communities where we operate. Together, we will further develop a platform for significant value creation that benefits our customers, employees, and shareholders.”

GXO officials cited various drivers for how acquiring Wincanton would advance its position as a global pure-play contract logistics leader and also create shareholder value, including:

• expanding GXO’s presence in key strategic growth verticals, with the combination expanding GXO’s offering and customer base in a number of growth verticals in the UK, providing GXO with a springboard to offer industrial services across Europe;
• GXO’s market-leading service platform for aerospace and defense in the U.S., with the combined company enhancing service for UK customers in that vertical by leveraging GXO’s capabilities and expertise;
• allow for new and existing customers to benefit from a broader range of services and capabilities and an expanded global platform;
• Wincanton customers will have the opportunity to seamlessly globalize their supply chain operations across the 27 countries where GXO operates;
• improve operations for UK and Ireland customers through advanced technology, as GXO prides itself on its technology and automation, with combination allowing Wincanton customers to enhance the efficiency and resilience of their fulfilment operations through advanced tech deployment;
• create significant value for shareholders and provide additional growth opportunities, with complementary service offerings, customer portfolios and footprints providing additional growth opportunities; and
• the complementary infrastructure and offerings will enable GXO to manage the combined company more efficiently, resulting in greater productivity and lower costs for the benefit of customers

GXO is comprised of more than 130,000 team members across more than 970 facilities totaling approximately 200 million square feet.

This will not represent the first time GXO has acquired a UK-based company. In February 2022, it acquired London-based Clipper Logistics plc, a provider of omni-channel retail logistics services.

Evan Armstrong, president of Brookfield, Wisc.-based supply chain consultancy Armstrong & Associates, said that as the U.K. is GXO’s largest market, in terms of revenue and second largest in contract logistics space with 303 warehouses covering 42 million square feet, helped by its May 2022 purchase of U.K.-based omni-channel retail logistics provider Clipper Logistics plc, the Wincanton deal only solidifies GXO’s foothold in the region, where Wincanton covers over 16 million square feet of contract logistics space. 

“GXO and Wincanton align with a lot of the same verticals; however, there isn’t much overlap in customers, especially those with long-term relationships,” he noted. “In addition, both companies closed on e-commerce fulfillment deals in recent years. In September 2021, Wincanton acquired Cygnia Logistics along with its 700 employees and four sites in the U.K.  Then last November, GXO scooped up PFSweb with warehousing space in the U.K. as well as in Belgium, Canada, and to a larger extent, the U.S., rounding out the service offering.”

TD Cowen analyst Jason Seidl wrote in a research note that his firm believes the synergies, for the deal, to be largely on the cost side, and he agreed with Armstrong, in that the companies have some customer overlap, which he said will be cannibalized.

“The deal would allow GXO to grow into the smaller UK market which is largely an open-book driven model, which comes with minimal upfront cost for GXO (and less risk) and fixed margins, though upside is likely limited,” wrote Seidl. “GXO has previously spoken to a $450bn total addressable market of which $300bn is insourced with customers, thus implying a $150bn outsourced market. We believe GXO's U.K. market share is likely below the thresholds that would pose major obstacles to a transaction though the competition regulator is likely to undertake a review as was the case in the Clipper transaction.”

Ben Gordon, founder and managing partner of Palm Beach, Florida-based Cambridge Capital, and managing partner of Ben Gordon Strategic Advisors (BGSA), explained that this deal is a good illustration of a back-to-basics kind of deal, calling it a good old-fashioned consolidation.

“What Wincanton gives GXO is the ability to boost their market penetration in Europe; it is particularly strong in the UK, but continental Europe as well in contract warehousing logistics and other value-added services,” said Gordon. “This [deal] is really doubling down on something that GXO already does, which is why I call it a return to classic consolidation.”