Potential DSV acquisition of Panalpina takes a turn with Agility now in the mix

More than a few moving parts remain intact, when it comes to the interaction between Basel, Switzerland-based global 3PL and airfreight forwarder Panalpina by Hedehusene, Denmark-based global 3PL DSV, in regards to the latter’s pursuit of the former as an acquisition target.

On February 4, Panalpina said that the Ernst Göhner Foundation, the company’s largest shareholder representing approximately 46% of the total share capital, told the Panalpina Board of Directors it did not support DSV’s acquisition offer, of more than $4 billion, to acquire the company, adding that it supports Panalpina’s Board of Directors in pursuing an independent growth strategy that includes M&A.

Over the 11 subsequent days, there have been more than a few moving parts to this story.

One part has to do with DSV’s perseverance in its desire to acquire Panalpina. The company said earlier today it has upped its offer to acquired Panalpina by $10 per share ($180 CHF), in an all-cash offer to Panalpina shareholders. DSV said that this offer was made “in response to feedback received from Panalpina and included e.g. certain commitments to be specified towards Panalpina’s employees and the Panalpina heritage.” Panalpina said it is reviewing this revised proposal from DSV.      

And in January 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.

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.

This belief was prescient, to a point, as it appears Panalpina may be seeking to collaborate with a separate global 3PL, Kuwait-based Agility Group, according to various reports.

Agility confirmed this in a statement issued today, saying: “Agility confirms that it is in early discussions with Panalpina about partnership opportunities between the logistics businesses of the two companies. Agility is always exploring opportunities to grow its business and maximize shareholder value. No agreement has yet been reached and there are no guarantees that an agreement will be reached.”

And Panalpina said that its board of directors confirmed media reports that it is in discussions with Agility on “potential strategic opportunities with regard to their preliminary logistics businesses,” adding that these discussions are at a preliminary stage.

What happens next, in regards to next moves made by DSV, Panalpina, and Agility, remains to be seen.

As for DSV, Dick Armstrong, chairman of supply chain consultancy Armstrong & Associates, said that he expects DSV to look for another large acquisition prospect.

“Maybe they need to look at Asian or North American prospects,” he told LM. “Panalpina can be a difficult company to work with because of the charities [which comprise a major percentage of its board of directors]. Success of a merger might depend on putting them under wraps.”

Evan Armstrong, president of Armstrong & Associates, said that in terms of Agility, his firm thinks it makes more strategic sense for Panalpina to consummate a deal with DSV than buy Agility, which has a smaller incremental benefit.

“At this point, it all seems to be up to the Ernst Göhner Foundation which sees things differently,” he said.

A Bloomberg report published today indicated that role of charities at Panalpina is not an issue, as it relates to a potential future with Agility.

The report said that negotiations about combining Panalpina and Agility are progressing and a transaction is backed by the Ernst Göhner Foundation, Panalpina’s biggest shareholder, according to people familiar with the situation. 

“A Panalpina-Agility merger would likely include a stock element, and Ernst Goehner plans to retain a stake in the combined entity, the people said,” the Bloomberg report said. “An agreement could be struck as early as this week, one of the people said, though others cautioned that talks could still fall apart.” 

According to Chris Rogers, research director for global trade intelligence firm Panjiva, a deal between Panalpina and Agility would be a merger of equals given Agility’s enterprise value is 118% that of Panalpina and its revenues are 98.3% of Panalpina's.

“Concluding such a deal would be time consuming however and would give DSV time to respond and for Panalpina to consider other options,” he wrote in a research note. “One such option would be for Panalpina to consider a vertical deal with a container-line as CEVA Logistics has done with CMA-CGM. Its options may be limited though. Of its top four container-line counterparties only Ocean Network Express (ONE), which accounted for 21.6% of Panalpina’s U.S.-seaborne imports in the 12 months to Jan. 31 and is jointly owned by K-Line, Mitsui-OSK and Nippon Yusen, is not already affiliated to another freight forwarder.”