GXO/Clipper: logistics expertise delivers for shareholders
Investors on the lookout for take-out candidates in sector experiencing growth and consolidation
As ecommerce boomed during lockdown, so did demand for the machinery that makes it happen. Powerful trends are driving growth and consolidation in the logistics sector. A proposed £943mn bid for British ecommerce specialist Clipper Logistics by New York-listed GXO Logistics is the latest in a flurry of deals.
Investors will be on the lookout for the next take-out candidate. Shares in Wincanton, another UK logistics company, rose 4 per cent on Monday morning. The number of potential acquirers has expanded as ship owners, flush with cash from high freight rates, have moved into the sector.
For sure, some air has escaped from contractors’ valuations amid worries about lorry driver shortages and wage inflation. GXO’s potential cash-and-share offer is a 32 per cent premium to Clipper’s three-month average. But it is much the same as the September share price, which — at 32 times forward earnings — was half as much again as the 10-year average.
GXO should be able to cover the premium with savings from procurement and other costs, and, more nebulously, with cross-selling gains. The deal will extend GXO’s geographical reach to Germany and Poland, and will add fast-growing life sciences to its sector specialisms.
The US company has until late March to publish a formal offer. But with investors representing 23 per cent of the shares backing the deal, the initial 14 per rise in Clipper’s share price to 885p on Monday lifted it to just 4 per cent below the offer price.
There is plenty of scope for further consolidation. GXO has just 5 per cent of the outsourced market, even though it is the largest pure-play contract logistics provider, and the biggest overall after Deutsche Post DHL. Outsourcing too is growing; it accounts for just a third of the $430bn market for logistics in Europe and North America, according to Jefferies.
The use of specialist contractors is growing with the realisation that delivery plays a critical role in the consumer’s experience. Expect leading contractors such as GXO to make the most of their technology and expertise, extending their reach through takeovers such as this.