DC Velocity - May 2015

newsworthy

BRAD JACOBS HAS GONE SHOPPING IN EUROPE, and he has brought the big wallet.

Jacobs, the founder, chairman, and CEO of freight broker and third-party logistics service provider XPO Logistics Inc., announced April 28 a move that represents one of the most ambitious bets in the third-party logistics industry’s history: his company’s acquisition of French transport and logistics giant Norbert Dentressangle S.A. for US$3.53 billion in cash and debt. The acquisition, the largest of Jacobs’ acquisitive three-decade career spanning multiple industries, catapults Greenwich, Conn.-based XPO into the global big leagues by taking out one of the biggest players in a mostly fragmented marketplace.

Under the deal’s terms, founder Norbert Dentressangle will sell his family’s 67-percent ownership in the Lyon, France-based company for 217.50 euros (approximately US$243.19) per share. XPO will then tender for the balance of Dentressangle shares at the same price. The deal’s value represents a 37-percent premium to Dentressangle’s April 27 closing price.

Not since Deutsche Post DHL’s US$6.7 billion purchase of the U.K. contract logistics provider Exel in 2005 can anyone remember a deal this large that involved a mostly nonasset-based provider. Dentressangle’s capital expenditures equal just 2. 5 percent of revenue, meaning its “asset intensity” is low, according to XPO.

The deal, slated to close by the end of June, will push XPO’s annualized revenue to $8.5 billion about two years ahead of its initial timeline for hitting that mark, the company said. Herve Montjotin, Dentressangle’s chairman and CEO, will become CEO of XPO’s European business and president of the parent company, XPO said. Dentressangle will retain its Lyon headquarters, and XPO has pledged to keep all of the company’s full-time employees for at least 18 months from the deal’s closing date.

The Dentressangle name, which has been around since
1979, will disappear once the deal closes. The business will
then be known as XPO Logistics. Jacobs said in an interview
that all of XPO’s operating companies known by other
names, such as XPO Last Mile for its last-mile delivery busi-
ness, have been rebranded under the XPO Logistics name.
In Dentressangle, XPO acquires a company that, in
Jacobs’ words, “is a mirror image of our own, only in
Europe.” Of Dentressangle’s US$5.5 billion in 2014 rev-
enue, about $2.7 billion came from contract logistics (a
somewhat fancy term for warehousing); $1.2 billion from
freight brokerage; and $1.1 billion from company-owned,
independently operated, and dedicated over-the-road
trucking services. The balance came mostly from air- and
ocean-freight forwarding.
Retail and FMCG (fast-moving consumer goods) cus-
tomers account for 70 percent of Dentressangle’s con-
tract logistics business, according to Armstrong &
Associates Inc., a consultancy. Dentressangle is also a
leader in the handling of bulk and temperature-con-
trolled goods, Armstrong said.

BUYING SPREES

Both companies have been acquisitive and have leveraged their dealmaking to expand into virtually all areas of logistics. For example, XPO was founded in 2011 with the objective of building footprints in brokerage, freight forwarding, expedited transport, and intermodal. Since then, it has expanded into contract logistics, transportation management, and last-mile deliveries and gotten deeper into intermodal than Jacobs originally envisioned, with its 2014 purchase of Dublin, Ohio-based Pacer International.

Jacobs said in the interview that XPO’s penetration into other segments was driven by his desire to be a “ comprehensive solutions provider” and by demands from shippers in the U.S. and abroad to work with a smaller universe of vendors with a myriad of service offerings integrated under one roof.

The U.S. accounts for about 26 percent of Dentressangle’s contract logistics business, most of which came from its $750 million acquisition last July of Des Moines, Iowa-based Jacobson Cos. Jacobs said XPO became interested in Dentressangle after finishing second in the bidding for Jacobson. “We wanted to know more about who beat us,” he said. Jacobs said the fit between the two firms was so compelling that he sought to begin talks in earnest.