GXO Logistics announced Monday a firm offer to acquire U.K.-based Clipper Logistics. Terms of the offer are unchanged and if successful, GXO would acquire Clipper for approximately $1.3 billion in a cash and equity transaction.
Under the proposed deal, Clipper (CLG.L.EB) shareholders will receive 920 pence ($12.33) per share, 75% of which would be distributed in cash with the remainder coming from newly issued shares of GXO stock.
GXO (NYSE: GXO) previously announced Feb. 20 that Clipper had agreed to terms of a possible offer. Insiders holding 23.3% of Clipper’s stock, including Executive Chairman Steve Parkin, agreed irrevocably to the terms of the transaction.
“Together, GXO and Clipper have a one-of-a-kind growth opportunity, building on our shared commitment to a top-quality customer experience, innovation and industry-leading expertise,” GXO CEO Malcolm Wilson said. “Steve Parkin and the Clipper team have created an exceptional business with outstanding capabilities. We will build on it.”
The deal helps expand GXO’s e-commerce and e-fulfillment platforms. Clipper primarily runs a shared distribution network of approximately 50 facilities (15 million square feet of space) throughout the U.K., Germany and Poland, facilitating e-commerce and returns functions for multiple customers out of the same location.
The company reported revenue of $946 million in its recent fiscal year ended April 30, 2021, but revenue growth was 33% higher year-over-year through the first half of its current fiscal year.
“We’ll strengthen our returns and repairs capabilities, expand our e-commerce customer base and bolster our presence in key growth areas, including Germany, Poland and life sciences, and accelerate the expansion of GXO Direct to Europe,” Wilson added.
In addition to cross-sell opportunities across the two platforms, operating cost synergies are expected to equal $48 million three full years into the deal. The press release said a portion of the cost synergies will come from operational overlap but noted that headcount in the U.K. will see long-term growth given GXO’s ongoing initiatives in the region.
Clipper operated at a 12% EBITDA margin in its recent full fiscal year.
The deal is expected to be immediately accretive to earnings excluding synergies and “double-digit enhancing” when including the full impact of the cost reductions. The transaction is expected to cover its cost of capital three full years after closing.
The deal price implies a less than 12x enterprise value-to-EBITDA multiple based on trailing results. It also represents an 18% premium to Clipper’s closing share price on the last day of trading prior to the announcement of a possible offer and a 32% premium to the three-month weighted average share price.
GXO has completed several acquisitions in recent years. In addition to M&A, the company has multiple organic growth opportunities ahead as it plays for share in the $430 billion logistics markets of North America and Europe.
“We believe our very strong cultural fit, deep familiarity with local industry dynamics and commitment to invest and grow in highly attractive markets will enable a seamless integration,” Wilson continued. “We’re very excited about the tremendous possibilities ahead and the value we can create for customers, employees, shareholders and the communities we serve.”
| Acquisition price | ~$1.3B |
| Combined value | ~$13B enterprise value |
| Clipper’s revenue run rate | $946M in FY21 |
| GXO’s revenue run rate | $7.9B in 2021 |
| Earnings potential | 12% EBITDA margin, immediately accretive to EPS (double-digit accretion post full synergies) |
| Financing | 75% cash, 25% equity |
| Other acquisitions | Menlo Logistics, Norbert Dentressangle & New Breed Logistics |
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