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Maersk circles DB Schenker as it ponders acquisition

Maersk has appointed financial advisors to help the carrier evaluate its freight forwarder target DB Schenker which was put up for sale last year.

Danish business daily Borsen reported that Maersk CEO Vincent Clerc has appointed investment bankers to assess and advise the Danish carrier in its quest to buy a major forwarder.

Responding to questions, Clerc told Borsen: “When you are investigating it [DB Schenker acquisition], you must do it properly. That means we are getting the assistance and help needed to run a good process.”

The surprise disclosure that Maersk has taken the next step in its bid to acquire a large freight forwarder comes after Clerc had revealed, during the company’s full year results last month, that the carrier had changed direction and would consider a forwarder acquisition.

Clerc explained that any fears of “disynergies” that the company harboured in the past are no longer applicable and so it is necessary to see where this investigation into a Schenker acquisition goes.

Former research analyst Mark McVicar told Container News he believes that Clerc, by making such a bold statement during the earnings call, was sending a message to other potential buyers that Maersk is interested and to keep away.

However, McVicar also identifies risks in the strategy.

Clerc had said: “On the freight forwarding side one of the things that has changed is the resilience of earnings on the other side of Covid, which you can see with both Schenker and some of its competitors and also the fact that we have one company in CMA that has been able to house both a 2PL and 3PL offering under the same roof and has been able to do that, as far as we can see, successfully.”

In referring to CMA CGM as a successful proponent of this strategy, McVicar pointed out that the French carrier was a “very private company” and that if it had “lost a chunk of business [following its acquisition of Ceva in 2019] it’s not telling anyone about it.”

Moreover, McVicar, who covered Schenker when the company was listed, before 2004, said that after 20 years of ownership by Deutsche Bahn during which the forwarder was seen as the poor cousin, there were low levels of investment in the company as DB focused on rail investment.

“That means there were not the right levels of investment in DB Schenker in those years and so there are not the same levels of profit as its competitors,” explained McVicar.

In particular, he pointed to the high levels of investment required in digital trading, including booking, tracking amongst other things, necessary to bring the German forwarder up to a similar level with its immediate competitors in profitability.

“The last time I looked Schenker’s profitability was a good way below that of DSV, Kuhne or DHL,” said McVicar.

Nevertheless, Maersk has stopped expanding its fleet and is looking to expand other elements of its business, decreasing its dependence on port-to-port services.

“Our strategy is very clear. We need to diversify our revenue and earning streams towards a more stable and less volatile part of the supply chain, which is pretty much anything outside ocean to pier,” said Clerc.

Another possible hitch could be that Maersk will enter into competition with its own clients, a problem that was considered with the Damco brand.

McVicar said: “If you are a cargo owner and you can see that Hapag or CMA have cheaper rates, you wouldn’t want to see your freight end up on a Maersk ship.”

An investment banker, who preferred to remain anonymous, put it more bluntly: “If I’m at Kuhne why would I book with CMA?” he asked rhetorically, “They’ll just steal my business,” he answered.

According to the source, the most successful liner company over the last 10 years is MSC and, excluding the strategic Bollore Africa, has not acquired a logistics company, but focuses on its port-to-port operations.

“It’s difficult for a seafreight business to pretend its [logistics arm] is at arm’s length, particularly if it has a large market share, only if the logistics company is a similar size, then they may be able to fill ships with their own business, but that’s not likely,” he said.

In addition, the source argues that Klaus Michael Kuehne “has got it right”, he has a large shareholding in both Kuehne + Nagel and Hapag-Lloyd, but never merged the freight forwarding business with the shipping line.

He concluded that Maersk and Hapag-Lloyd, the two Gemini Cooperation partners, will be very different companies if and when Maersk “ties down its freight forwarder strategy”.

Nevertheless, Clerc believes the opportunity to enter a sector using an entity that is the size of Schenker is rare: “In that respect, having something like a Schenker coming on the market is definitely something that Maersk cannot simply say we’re not going to look at it.”

However, he concedes that acquiring Schenker is not a “do or die” strategy. Clerc said, “The size of the deal and the fact that when a deal like this happens it will have consequences, because if we do or don’t do the deal it will change the landscape in logistics.”

Even so, there are still major hurdles to overcome, one in particular that both Clerc and McVicar alluded to: “There is also a fundamental price issue”, that could scupper the deal.

Moreover, McVicar points to the fact that Maersk does not have the managerial expertise to operate a major forwarder, which will make the carrier reliant on its existing management, but he added that this same management had expected to be able to buy the company, and McVicar speculates, that they may not be so willing to join Maersk in its odyssey.

Mary Ann Evans
Correspondent at Large

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