Maersk to Buy Hong Kong-Based LF Logistics for $3.6B

A.P. Moller – Maersk announced Wednesday it has reached an agreement to acquire 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 pan-Asian network with 10,000 people, and 223 warehouses and fulfillment centers in 14 countries totaling 29 million square feet. It is privately owned by Li & Fung (78.3%) and Singapore sovereign wealth fund Temasek Holdings (21.7%).  In 2020, LF Logistics reported revenue of nearly $1.3 billion and adjusted earnings before interest, taxes, depreciation, and amortization of about $235 million.

Li & Fung is an investment holding company that engages in trading and supply chain management for global brands and retailers. 

Stratospheric ocean rates resulting from ocean shipping bottlenecks have pushed Maersk, the world's largest container line, to record profits. It is investing the proceeds to expand beyond ocean freight to become a turnkey third-party logistics provider that can meet the varied supply chain needs of multinational companies. With direct access to vessels, aircraft, and warehouses it can guarantee capacity to its best customers, which is becoming increasingly valuable during periods of high demand. Earlier this year it acquired three European e-commerce companies and agreed to purchase German freight forwarder Senator International. Maersk also owns an all-cargo airline.

Other major ocean carriers are also pursuing similar strategies to become one-stop supply chains and logistics shops that offer cargo owners more resilient supply chains and downstream visibility for freight transportation.

CMA CGM two years ago acquired Ceva Logistics, started a cargo airline early this year and this month agreed to purchase the e-commerce division of Ingram Micro. On Monday, Mediterranean Shipping Co. made a bid to acquire the Africa division of France-based Bolloré Logistics.

Maersk line said it is paying a multiple of 14.4 times pre-tax earnings for LF Logistics.

"The acquisition of LF Logistics is an important and truly strategic milestone on our journey to become the global integrator of container logistics; a global logistics company that provides digitally enabled end-to-end logistics solutions based on control of critical assets. With the acquisition of LF Logistics, we add critical capabilities in Asia Pacific to support our customer's long term growth in Asia Pacific as well as capabilities and technology we can scale in our contract logistics business globally," said Soren Skou, CEO of Maersk.

With the deal, Maersk will have 102.3 million square feet of warehouse space in 549 locations under its control.

"With this move, we will boost our warehousing and distribution offering and respond to the rapidly growing needs of our customers for contract logistics. . . .LF Logistics has built an unparalleled track record of executing a superior omni-channel strategy for customers, which is a unique position we can use to build and operate fulfillment to customers across our network," said Vincent Clerc, CEO of ocean and logistics at Maersk.

 As part of the agreement to acquire LF Logistics, Maersk will enter a strategic partnership with Li & Fung to develop logistics solutions, with Li & Fung focusing on digitally enabled upstream sourcing and Maersk focusing on the outbound distribution. 

The acquisition is subject to regulatory approvals and is expected to close in 2022, Maersk said. 

Li & Fung's divestment of the logistics division will allow it to focus on trade and supply chain digitalization services, the company said. It recently formed LFX, a company focusing on digital ventures, investments, and supply chain finance with GLP, its Singapore-based partner.

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