HOUSTON and AMSTERDAM, Netherlands—After weeks of on and off negotiations, third-party logistics (3PL) services provider EGL will be acquired by CEVA Group Plc, a subsidiary of private equity firm Apollo Management Ltd., for approximately $2 billion.

This is Apollo’s second 3PL play in the last year in a market which has seen a number of consolidations in recent years. Last November Apollo acquired TNT Logistics for approximately $1.9 billion. After the sale was officially completed, TNT was re-named as CEVA.

This deal is likely to provide shippers that currently use CEVA and EGL for logistics and transportation services with various benefits, according to Evan Armstrong, president of supply chain consultancy Armstrong & Associates.

“This is a good deal for existing customers,” Armstrong said. “It provides CEVA with much needed international freight forwarding capabilities and allows EGL to leverage CEVA’s vast warehousing network. This deal will facilitate global trade.”

Armstrong added that these companies have very good skill sets and will be able to manage complex global supply chains.

“Once the integration is complete you will have a provider with the extensive value-added warehousing capabilities and solid international transportation management skills required by multinational customers,” noted Armstrong. “This is also a nice fit in terms of IT,” Armstrong added. “CEVA has a solid suite of warehouse and transportation management systems for contract logistics customers, and EGL has good customs clearance and freight forwarding systems.”

These capabilities, he added, will allow CEVA to expand further within the attractive high-tech vertical and continue to meet the needs of its global automotive customers.

Ben Gordon, managing director of BG Strategic Advisors, said that this deal will provide shippers with a “one-stop shop” of sorts, as EGL/CEVA will combine contract logistics and global freight forwarding under one roof.

Gordon said the move represents another milestone in the consolidation of the logistics industry.

“Ten years ago, the top 50 logistics companies controlled just 20 percent of the market,” he said. “Today, the top 50 [3PLs] control 50 percent. Within 10 years, we believe the top 50 will control 80 percent...deals like [this] accelerate that trend.”

According to Armstrong & Associates data, this deal makes CEVA/EGL the fifth-largest 3PL in the world with slightly more than $7.8 billion in 2006 gross revenues.

Another significant aspect of this merger, noted Gordon, is that it highlights the convergence of services. He cited a few examples of this, with EGL/CEVA combining freight forwarding with contract logistics, Jacobson and Wilpak combining warehousing with contract packaging, and Powerhouse Agility Logistics (formerly PWC Logistics) acquiring Geologistics to blend warehousing with freight forwarding.

“We are just witnessing the tip of the iceberg,” said Gordon. “Service convergence will become a watchword in the 3PL industry over the next two-to-three years.”

Armstrong noted that the deal shows how 3PLs are combining, growing, and reemerging with greater skill sets.

Other notable recent 3PL and service provider consolidations include: Deutsche Post World Net’s acquisition of Exel, Deutsche Bahn’s purchase of BAX Global, and Kuwaiti port operator DP World’s buyout of P&O’s ocean shipping terminals.

“The 3PL market is still very fragmented and the overall 3PL penetration of the potential global 3PL market is less than 20 percent, so as logistics outsourcing continues to grow so will the number of providers,” Armstrong said.

“The real line of demarcation will be which 3PLs are global supply chain mangers versus those who are focused on a major market or niche,” Armstrong added.