Ocean shipping goliath A.P. Moller – Maersk announced Wednesday it has finalized the acquisition of LF Logistics, a Hong Kong-based contract logistics company, specializing in omnichannel fulfillment services, e-commerce and inland distribution in the Asia-Pacific region, for an enterprise value of $3.6 billion.
LF Logistics operates an extensive Asian network with 10,000 people, 223 warehouses and fulfillment centers in 14 countries totalling 29 million square feet. It is majority owned by Li & Fung, an investment holding company that engages in trading and supply chain management for global brands and retailers.
Until now, Maersk’s Asia focus has primarily been on ocean exports and related logistics services out of Asia to consumer markets in Europe and North America. The diversified container line considers the acquisition an opportunity to cross-sell LF Logistics’ order fulfillment services to Maersk (DXE: MAERB) customers and its freight transportation services to LF customers.
The LF takeover, agreed to in December, brings the total number of global facilities in Maersk’s portfolio to 549, with a total footprint of more than 102 million square feet.
The deal is part of Maersk’s strategic transformation, fueled by record shipping profits, into an end-to-end logistics services provider with a buffet of integrated, standardized freight options to handle the supply chain requirements of multinational companies. With the second-largest container fleet, a growing cargo airline, cross-border freight and customs management, warehousing and distribution, line-haul trucking and e-commerce fulfillment and last-mile home delivery, Maersk has the logistics bases covered. As such, it is developing stickier relationships with shippers, who are willing to pay more for value-added services, rather than simply being a provider of commoditized port-to-port transportation.
Early this year, Maersk acquired U.S.-based Pilot Freight Services for $1.8 billion and German freight forwarder Senator International for $644 million. Pilot specializes in first-, middle- and final-mile transportation, especially for big and bulky items. Senator is a major airfreight forwarder. Other acquisitions in the past two years include warehousing and distribution provider Performance Team and e-commerce fulfillment outfit Visible SCM.
“With the addition of LF Logistics, Maersk gains unique and best-in-class capabilities to servicing the important and fast-growing consumer markets in Asia. Furthermore, LF Logistics’ expertise in omnichannel fulfillment positions us well with the global e-commerce market,” Ditlev Blicher, regional managing director of Asia Pacific at Maersk, said in a news release.
In an interview with the Financial Times, Blicher said Maersk plans to migrate the LF logistics platform beyond Asia to the rest of the world.
Other large ocean carriers are also becoming integrated supply chain operators that offer cargo owners more guaranteed access to transport capacity and downstream visibility.
Combining Maersk, LF Logistics
LF Logistics specializes in business-to-business and business-to-consumer distribution services within the retail, wholesale and e-commerce sectors, generating strong profits for more than 20 years. It will immediately operate under the Maersk brand.
Under terms of the deal, Li & Fung and its investment partner could earn another $160 million based on the future financial performance of the logistics unit.
“Maersk’s global presence provides an ideal platform for our next phase of organizational expansion and development,” said Joseph Phi, group CEO of Li & Fung and CEO of LF Logistics. “The unique and complementary strengths of the two companies will allow our customers to achieve sustainable competitive advantage and our people to attain their full potential. We look forward to a seamless transition experience for both our colleagues and customers.”
The $3.6 billion sales price includes lease liabilities for warehouses. Maersk paid a premium for LF Logistics, with a value at 14.2 times earnings before interest, taxes, depreciation and amortization that reflects its high-growth potential. The company projects that LF Logistics will more than double revenue and EBITDA by the end of 2026 through organic growth and additional capabilities enabled by the merger.
As part of the transaction to acquire LF Logistics, Maersk entered a strategic partnership with Li & Fung to develop a comprehensive range of end-to-end global supply chain services with Li & Fung focusing on the upstream supply chain and Maersk concentrating on the downstream distribution.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
