GXO Logistics announced Sunday it has reached a tentative agreement to acquire U.K.-based Clipper Logistics for roughly $1.3 billion in cash and stock.
Under the “possible offer,” GXO (NYSE: GXO) would use 75% cash and 25% in new equity to acquire Clipper’s (CLG.L.EB) common shares. At 920 pence per share ($12.50), the deal marks an 18% premium to Friday’s close.
The combination would increase “opportunities for both businesses in the high-growth e-commerce/e-fulfilment areas,” a press release stated. The emerging sector is a key focal point for GXO, which became the second-largest contract logistics company globally when it spun off from XPO Logistics (NYSE: XPO) last summer.
Clipper is an omnichannel retail logistics provider with two-thirds of its revenue tied to e-commerce and returns. The company operates two divisions: value-added logistics, which includes e-fulfillment, reverse logistics and other logistics services; and a commercial vehicle sales and service segment.
It added electronics repair services in November when it acquired Netherlands-based CE Repair.
“Our two companies have highly complementary service offerings, customer portfolios, and footprints in the UK and Europe, and we are natural partners with a very strong cultural fit,” Malcolm Wilson, GXO’s CEO, told FreightWaves in a statement. “We believe we can achieve very significant productivity opportunities by taking advantage of technology and infrastructure overlap in the joint enterprise.”
For its most recent full year ended April 30, Clipper generated revenue of 696 million pounds ($946 million) with 82 million pounds ($111 million) in earnings before interest, taxes, depreciation and amortization (11.8% EBITDA margin). The company had 11.2 million pounds ($15.2 million) in net debt for the period ending Oct. 31.
The deal price implies a less than 12x enterprise value-to-EBITDA multiple based on trailing results.
| Acquisition price | ~$1.3B |
| Combined value | ~$13B enterprise value |
| Clipper’s revenue run rate | ~$1B |
| GXO’s revenue run rate | $7.9B in 2021 |
| Earnings potential | 12% EBITDA margin |
| Financing | 75% cash, 25% equity |
The companies offer similar services and have some customer book overlap. However, the deal is expected to present cross-sell opportunities given the larger scale of the combined entity. Also, GXO gains expertise in returns and repairs and will be able to leverage Clipper’s e-commerce fulfillment platform. Clipper also adds a physical presence in Germany and Poland.
Cost synergies were noted as “significant” in the first two years and center on procurement advantages from larger scale and operational consolidation.
Shares of Clipper have gapped 26% higher since the Jan. 27 close, the day prior to the offer. The 920-pence offer price represents a 49% premium to that date and a 32% premium to the three-month weighted average share price.
Once a firm offer is made, the deal remains subject to pre-conditions, finalized due diligence and securing debt financing. The final purchase price can fluctuate based on changes in exchange rates. Clipper shareholders will be given an opportunity to “mix and match” distribution percentages between cash and GXO stock.
A group of insiders holding 23.3% of Clipper’s stock, including Executive Chairman Steve Parkin, have agreed irrevocably to the terms and will take half of their consideration in GXO stock.
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