Global Logistics: DHL buys out remaining share of Sinotrans-Exel JV
Jeff Berman, Senior Editor -- Logistics Management, 12/14/2007
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SINGAPORE—Express service and logistics provider DHL said today it has officially completed an arrangement with with Sinotrans (Sinotrans Air Transportation Development Co Ltd) for its parent company Deutsche Post World Net (DPWN) to purchase the remaining 50 percent share of the Sinotrans-Exel JV (joint venture) in China, which was formed in 1996.
News of this deal possibly happening were reported by AFX News in June, when it was reported that DHL had expressed interest in bidding for a 50 percent stake in Exel-Sinotrans Freight Forwarding Co Ltd, a joint venture between Exel LLC, an affiliate of Deutsche Post. DHL’s President of Greater China and South Korea, Jerry Tsu said in the report that DHL was in talks with Sinotrans at the time, but that there was no progress to report at the time.
The new wholly owned foreign entity (WOFE) will “facilitate the continued integration of the heritage Exel and DHL business units under the DHL Logistics brand in China, creating greater business synergies and providing enhanced customer benefits while driving economies of scale,” according to a DHL statement.
Evan Armstrong, president of Armstrong & Associates Inc., a supply chain consultancy in Stoughton, Wis., described this move as one of many that Deutsche Post World Net and DHL Logistics has taken to tap the growing potential of the rapidly expanding domestic Chinese economy.
He explained that Exel initiated its Chinese operations in 1984 by forming an agency agreement with Sinotrans—a leading provider of transportation and logistics and China. And in 1996 they strengthened the relationship forming Exel-Sinotrans Freight Forwarding Co. joint venture. With the DPWN acquisition of Exel in 2005, DHL gained control of contract logistics operations in 15 major cities in China with a total of 833,900 square feet of warehousing space and approximately 1,200 people, commented Armstrong.
“By buying out the JV, DHL Logistics further strengthens its ability to provide integrated solutions for customers supporting domestic Chinese supply chain management and international freight forwarding,” Armstrong told Logistics Management. “This move ups the ante for every other company wishing to become a leader in the domestic Chinese 3PL market.”
The DHL statement added that the purchase of the remaining stake from Sinotrans is another milestone for DPWN and is further proof of its commitment to invest in and expand the Group’s presence and capability in China, as evidenced by its November announcement that it has invested $175 million for its new DHL Express North Asia hub in Shanghai, China, which will be located at the Shanghai Pudong International Airport.
“DHL and Sinotrans have had, and continue to have, an ongoing and mutually beneficial relationship in the logistics and express industry in China,” emphasized DHL Global Forwarding’s Asia Pacific CEO Peter Landsiedel in a statement. “Sinotrans’ agreement to sell its 50 percent stake in the Sinotrans-Exel JV is strategically relevant to each organization, and is a move that suits both groups’ long-term objectives and approach towards developing and maintaining a market leadership position in China’s booming logistics industry.”
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