CMA CGM is selling its logistics division to CEVA as it seeks a majority stake in the company through a tender offer.
CMA CGM, the fourth-largest container carrier in the world, and CEVA Logistics announced details of their plans for closer cooperation on Monday.
CMA CGM, which already owns 33 percent of CEVA, plans to launch a tender offer for additional shares, while at the same time selling its logistics arm, CMA CGM Log, to CEVA.
“Via a takeover bid, we hope to obtain the majority of CEVA’s share capital and unleash its full potential,” said Rodolphe Saadé, chairman and chief executive officer of CMA CGM.
“We are convinced of CEVA’s potential. This industrial project will make it possible to speed up its transformation and to make it a more proficient leader of logistics, to the benefit of its clients, its employees and its shareholders. We are eager to work alongside all CEVA’s teams. Combined with their expertise and commitment, this strategic partnership will guarantee CEVA’s independence and will represent a new era in CEVA’s history.”
Longtime CMA CGM executive Nicolas Sartini will become chief operating officer and deputy CEO of CEVA. Sartini has been acting as CEO of APL since CMA CGM acquired it in June 2016.
Xavier Urbain, CEO of CEVA Logistics, said, “I am very happy to welcome Nicolas, who has successfully turned around the APL shipping company, as my deputy and COO.”
CEVA had spurned a takeover bid by the Copenhagen-based logistics company DSV last month.
Simon Heaney, senior manager of container research at Drewry, the London-based consulting and research firm, said, “Since CMA CGM acquired an interest in CEVA, it was only a matter of time before it took it over completely, a process that may have been accelerated by DSV’s recent approach.
“As such, it makes sense to consolidate and reboot CMA CGM’s freight forwarding and logistics activities under a new badge. CMA CGM obviously sees potential in CEVA and backs itself to turn into a more profitable enterprise while also enhancing its strategic vision of being a one-stop shop for customers, beyond what CMA CGM Log was deemed capable of achieving,” Heaney said.
The increased interest by liner shipping companies in the logistics business is seen by Lars Jensen, the chief executive officer of SeaIntelligence Consulting “partly as a cyclical movement in the industry–it is not the first time carriers are attempting to get deeper into the supply chain”
“The logical arguments for doing it are clearly present in an increasingly commoditized industry – but as mentioned this is not the first time we hear carriers have ambitions to do this. Hence the key here is not in whether it is a good idea or not, but in the practicalities of actually executing upon it,” added Jensen.
CEVA unveiled a revised strategic plan on Monday, saying it would benefit from the acquisition of CMA CGM Log, “acceleration of turnaround efforts with the support of CMA CGM’s corporate transformation expertise” and “leveraging of CMA CGM’s overall platform to accelerate revenue growth.” CEVA noted the potential for more cross-selling between the two companies, the ability to “strengthen key account relations…while diversifying to medium and small size customers,” as well as synergies from reduced back office costs and joint procurement.
In a presentation, CEVA identified these are new products the two companies could develop jointly: sea options from Mexico to the U.S., fast vessel services across the Pacific as an alternative to airfreight, advanced hub management, rail and truck services from China to Europe and sea coast services in Australia.
CEVA is targeting revenue of $9 billion by 2021, including 5 percent average annual organic growth, and a contribution of $630 million from CMA CGM Log. CEVA had revenue of $6.99 billion in 2017.
CEVA also upgraded management expectations on adjusted EBITDA in 2021 from $380 million to $470 million. CEVA’s adjusted EVITDA in 2017 was $230 million.
A “large minority” of CEVA is expected to remain in the hands of shareholders other than CMA CGM, and CMA CGM said, “All CEVA shareholders will have the opportunity to benefit from the substantial value creation expected from this new strategic partnership.
“For the shareholders wishing nevertheless to exit their investment in CEVA Logistics, CMA CGM has made today a preannouncement of a public tender offer for CEVA Logistics. The offer entails a price of 30.00 Swiss francs for each registered share in CEVA Logistics,” said CMA CGM. “This corresponds to a premium of 46 percent with respect to the volume-weighted average share price of CEVA Logistics shares on the SIX Swiss Exchange over the 60 trading days prior to October 1, 2018.” CEVA said it will remain an independent and standalone listed company.
Meanwhile on Friday, CMA CGM Group announced it had third-quarter profit of $103.1 million, less than a third of the $323.3 million reported in the same period last year despite an increase in revenue and containers carried.
Marseilles, France-based CMA CGM said in the third quarter this year it had revenue of $6.06 billion, 6.3 percent more than the $5.7 billion recorded in the same period last year.
It carried 5.26 million TEUs in the third quarter, 5.5 percent more than the 4.98 million TEUs carried in the same 2017 period. The company said, “This increase is attributable to the strength of most of the trades, particularly the transpacific, India/Oceania and Africa lines.”
Saadé said, “In a market growing by 2.5 percent to 3 percent, the increase in volumes shipped by CMA CGM demonstrates our commercial drive and the quality of service offered to our customers.”
The company’s operating income (core earnings before interest and taxes excluding asset sales and depreciation and nonrecurring items) was $241 million in the third quarter of 2018, less than half of the $568 million earned in the third quarter of 2017. As a result, CMA CGM’s core EBIT margin was 4 percent in the third quarter of 2018 compared with 10.4 percent a year earlier.
But Saadé said, “In a context of sharply rising fuel prices, CMA CGM core EBIT margin recorded a significant increase compared to the second quarter of 2018,” when the EBIT margin was 1.2 percent.
At the same time, CMA CGM grew its fleet to 2.69 million TEUs on Sept. 30, 7.5 percent more capacity than it had a year earlier. Among the ships it added to its fleet in the quarter was the 20,600-TEU CMA CGM Antoine De Saint Exupery.
Revenue per container in the third quarter of 2018 increased 0.8 percent compared to the third quarter of 2017 and 4.9 percent when compared to the second quarter of 2018.
CMA CGM said its unit costs rose $77 per TEU, with $55 per TEU due to higher fuel costs, an increase only partially offset by the introduction of an emergency bunker surcharge.
CMA CGM noted that on Oct. 31 it finalized its acquisition of the Finnish feeder company Containerships, which it says it will “densify” its regional coverage and complement its existing network, more particularly that of CMA CGM subsidiary MacAndrews, which already operates on intra-European lines.
Containerships will take delivery of four vessels powered by liquefied natural gas (LNG) in the coming months.
CMA CGM said it is continuing a “digital strategy aimed at differentiating itself from its competitors.” It highlighted these developments:
• The September start-up of CMA CGM’s incubator called ZeBox that aims “to support start-ups in their development through a strong network of partners, thereby enabling large companies to benefit from their innovations.”
• An agreement with a U.S.-based start-up called SHONE, which is working on “embedding artificial intelligence onboard ships. This partnership should facilitate the crew’s tasks in terms of decision-making support, steering and maritime safety.”
• Roll-out of what it calls “connected containers” using Traxens technology that allows for real-time monitoring of the container’s position, the intensity of impacts sustained, changes in temperature and humidity and the detection of doors being opened.
• The signing of agreements to develop blockchain technology in the shipping industry including a project for blockchain-secured electronic “bill of lading” with the start-up BuyCo, in which the CMA CGM has recently invested.
CMA CGM and CEVA detail their tie-up
