DSV will leap over DB Schenker into the third biggest forwarder by revenue position once its acquisition of Agility has been completed.
DSV Panalpina’s $4.2 billion acquisition of Agility’s Global Integrated Logistics business announced Tuesday will increase its combined annual revenue by nearly a quarter and strengthen its market position in both air and ocean freight transport.
When the deal is finalized in the third quarter, it will add 600,000 TEU to the 2.2 million TEU DSV handled in 2020 and 300,000 tons of air freight to the 1.3 million tons it carried last year. Agility will increase DSV’s annual revenue by 23 percent to $21.7 billion, leapfrogging DB Schenker into the third spot on the top 20 global forwarders table.
DSV CEO Jens Bjorn Andersen told JOC.com Agility had “always been on our radar while we were occupied with other acquisitions.” DSV late last year completed the integration of its $4.60 billion 2019 acquisition of Panalpina, and acquired UTi in 2016 for $1.35 billion.
“We then got together with the guys from Agility and saw that it would make sense,” he said. “What volume they give us initially is a good addition to what we already have at DSV, and the acquisition fits well into our strategy of growing through acquisition in a super-fragmented industry where even the largest players only have a very small market share.”
Andersen said the verticals served by Agility’s logistics business — electronics, retail, energy — complemented DSV, and the takeover would also bring a chemicals transport operation with a dedicated team.
The blockbuster deal overshadowed a highly positive set of first-quarter financial results reported by DSV Tuesday.
In a market that Andersen described as “exceptionally difficult,” and helped by positive comparisons to early 2020, the forwarder was able to grow Q1 revenue 28 percent year over year to $5.46 billion, increase operating profit 106 percent to $498 million, and grow net profit by almost six times to $378 million.
The profitable first quarter encouraged DSV to raise its earnings before interest and taxes (EBIT) expectations for 2021 by around 7 percent to between $1.82 billion and $1.95 billion.
Growing geographic footprint
Once integrated, Agility’s air and ocean segments will generate 79 percent of DSV’s total revenue. The purchase also significantly expands the forwarder’s global presence in emerging markets, the Middle East, and Asia Pacific. Agility will also bring with it more than 1.4 million square meters of contract logistics warehousing in the Middle East, Europe, and Asia.
With Agility holding a significant presence in the Middle East, a relatively untapped environment for DSV, Andersen said it would be “useful” to have an Agility representative on the board. Most of the Middle Eastern business is in the contract logistics space, and the Agility infrastructure that exists in the region would allow DSV to expand those services.
Andersen estimated the Agility acquisition would be finalized in the third quarter, at which point a two-year integration would begin. Although DSV is not changing its long-term strategy of growing through acquisition, he said the focus for the next couple of years would be firmly on integrating Agility.
“We have made an acquisition of $4.2 billion, and we have the deepest respect for that number, so we need to have our eyes fully set on the integration and synergies,” he said.
High rates drove Q1 results
DSV’s strong first-quarter financial performance was built on high rates in both the air and ocean segments, despite a decline in air freight volume and marginal growth in ocean.
Air freight volume fell 7 percent to 336,000 tons as the final effects of discontinued Panalpina activities were felt through the first quarter. Ocean freight volume increased 1 percent to 3.48 million TEU, with growth seen on trades out of Asia, especially on the trans-Pacific and to Europe.
"We are very happy with the air and sea freight performance,” Andersen said. “It has been exceptionally difficult for many of our customers, and we hope that things will calm down. I don’t think we will get back to where we were before COVID-19, but at least we may get into calmer waters maybe by the end of this year or at the beginning of next year.”
DSV results follow those of Kuehne + Nagel and DHL Global Forwarding, both of which reported highly profitable first quarters, significantly increasing revenue and net earnings.
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