ID 44645254 Dmitry Kalinovsky

At the turn of the year, I argued it would have been more difficult to quit smoking than to predict supply chain trends that would define 2017.

And in my last post of the year, I have come to realise there was one M&A bout I did not foresee – in the logistics property development sector, the first level of “downstream logistics” – which could have important ramifications for the competitive landscape of major forwarders and carriers worldwide.

Following the takeover battle for Singapore-based Global Logistic Properties (GLP), which builds, owns and leases distribution facilities, logistics properties and services around the world, a clear picture has emerged.

Most of the companies I cover quarterly are safe in 2018 if a bullish view supports this benchmark GLP deal. To my mind, this deal stole the limelight from all other downstream supply chain actions this year, as far as M&A activity was concerned.


A recap of where we stand: the company recently noted that, on 30 November, its shareholders approved the privatisation of GLP by way of a Scheme of Arrangement. “The payment of S$3.38 (US$2.51) in cash per share is expected to be made by 19 January 2018 and GLP will be delisted from the SGX thereafter.”


The implied $12.1bn valuation attributed to its equity is so high that could certainly spur optimism, particularly if you ignore the drop that preceded it – and, given its latest expansion plans in Europe, now it is double or quits for GLP and its owners, which are unlikely to stop chasing inorganic growth.

This week, it wrapped up the $2.8bn purchase of Gazeley, which led to the launch of “two new funds and increased the size of its fund management platform by $4bn (€3.4bn) to $43bn”.

There is some financial engineering involved, which should be expected from GLP and its owners, but nonetheless, as The Loadstar previously reported, this “is a big deal (…). The new portfolio is made up of 57% UK assets, 25% in Germany, 14% in France and 4% in the Netherlands.

“GLP itself is being acquired by a Chinese private equity consortium backed by executives from GLP”, who have been sniffing around the opportunity for over a year.

The stars were aligned. As Reuters reported in October, “in June, private equity group Blackstone agreed to sell European warehouse firm Logicor to China Investment Corp for €12.25bn ($14.4bn) in the biggest private equity real estate deal in Europe on record”.

(The obvious question here is whether Blackstone predicted the top of the market this year, while the GLP deal was actually a defensive move; after all. It’s a 50:50 call on the economy, in my view.)

Trends & inaction

So instead of contract logistics, which I expected to be far more attractive than other sub-sectors in logistics, it is actually pure logistics infrastructure driving the M&A sparkle that could ignite the debate about whether 2018 will be a good or bad year for all involved in supply chains.

So far, technology, automotive and more broadly upbeat consumer trends are often referred to as the driving forces behind demand, and there are signs more deal-making could ensue – but where?

The latest deal, announced this week, as The Loadstar reported, was US supply chain solutions provider ModusLink acquiring the largest US direct mail marketing firm, IWCO Direct, for $476m. But it is nothing compared to what is about to come in the fight for infrastructure and warehouse space, with private equity in the driving seat.

In this context, the private equity affair with CEVA Logistics is unlikely to end well for Apollo, and serves as a warning for forwarders and other supply chain services operators.

However, with regard to acquisitions, there appears to be plenty of opportunities for those freight forwarders that have not bent under the weight of falling margins and materially lower cash flows this year. It looks a lot like e-commerce trends are going to be their best ally for some time.

“DSV is the one actively looking for targets and it could spend big next year,” one banker in London told me this week, but others might continue to sit on the sidelines if investors continue to be willing to give them the benefit of the doubt.

“There are signs investors are pleased with the returns they secured.”

Behind the scenes

GLP is attractive because consumer demand is driving growth and, with the e-commerce boom, warehouses remain in short supply in many markets, while labour availability  could also be an issue.

As I previously wrote for Transport Intelligence, GLP captured the attention of investors in 2010 when it raised a war chest of almost S$3.5bn in the biggest IPO in Singapore since the early 1990s.

Some seven years later, its shares were not exactly shining on the stock exchange before it was taken over; one reason being that it was structured as one of the holding companies owned by Singapore’s GIC, itself set up to manage the country’s foreign reserves.

GLP is soon expected to hit revenues of over $1bn, and its latest expansion plan in Europe is not just a one-off: “Singapore’s sovereign wealth fund, GIC, is set to significantly expand its European footprint with the purchase of Czech-based warehouse developer P3 for €2.4bn,” The Loadstar reported one year ago.

GLP claims it is much more than a property developer, connecting consumers with products.

“We are much more than a bricks-and-mortar business – we provide solutions instead of just properties, helping customers improve their supply chains and increase efficiency through innovation.”

More coming

On the one hand, a takeover battle was hard to predict and was won by the usual suspects; but on the other, its growth rate was no longer acceptable in order to deliver sustained value. The deal is expected to close soon after, coincidentally, M&A waves in other sectors hit the wires in the past few days (click here, here, here, here, here, and here), which could impact supply chain activities of some major shippers early next year.

Meanwhile, other headlines this year – check this out: “Vanke aims to the world’s largest warehouse operator after GLP takeover” (Vanke is in the consortium which acquired GLP) – point to a possibly interesting fight for new space.

This is likely to take place where good friends will become even closer in a relatively small space; one that is growing at a stellar rate and where regulators are not prepared to intervene – despite replacement cost estimates that may place a question mark on deal-making, and associated valuations in the field.

There is one player, which has very close ties with GLP, that could take advantage – Sinotrans – which “could also be ready to spend in Europe to consolidate assets in contract logistics”, a banking source in London told me this week.

Consolidation will take time, but the odds are short that a key role will be played by the private equity industry, not only because buyouts reached the highest level in a decade this year, but also due to the rapidly rising size of a single transaction, such as KKR’s purchase of Unilever’s spreads business, where the commitment of a PE house which goes solo for a sizeable target has increased significantly against trends, while valuations remain pretty high in most sectors.

And with that, I wish my readers Merry Christmas and Happy New Year!


Leave a Reply