3PL News: Menlo acquires Chic Holdings Ltd, increases presence in China

Jeff Berman, Senior Editor -- Logistics Management, 9/10/2007

SAN MATEO, Calif. and SHANGHAI—Continuing its busy year of making acquisitions to broaden its service lineup and expands its service footprint, Menlo Worldwide—a third-party logistics (3PL) subsidiary of Con-way—said today it has signed a definitive agreement to purchase Shanghai-based domestic 3PL Chic Holdings Ltd and its subsidiaries Shanghai Chic Logistics Co. Ltd and Shanghai Chic Supply Chain Management Co. Ltd.

The sales price for the acquisition, according to a Menlo statement, is $60 million along with an undisclosed future earn-out performance-based incentive. The acquisition is subject to customary closing terms and conditions and is expected to close sometime in the fourth quarter. Last week, Menlo announced its June acquisition of Cougar Express Logistics—an acquisition geared to expand the companies presence in Southeast Asia—was made official.

As a domestic provider of 3PL and transportation management services, Chic is comprised of a full-service portfolio and network with 130 operating sites in 78 cities in China’s industrialized sectors and mainland interior provinces. In 2006, Chic had $55.2 million in revenue, marking a 40 percent increase over 2005. According to a Menlo statement the two companies will have more than 1,500 employees in China operating from 139 sites in 79 cities with almost 180,000 square meters of warehouse space under management. The statement added that Menlo’s Chic operations will be based at Chic Logistics’ headquarters in Shanghai. They will have approximately 30 primary customers in China, including major multinational manufacturers and CPG companies, as well as established China-based firms as well.

“This move in conjunction with Menlo’s acquisition of Cougar Express in Singapore emphasize Menlo’s re-found commitment to being a leader in the Asia Pacific 3PL market,” said Evan Armstrong, president of supply chain consultancy Armstrong & Associates.  Armstrong estimates total logistics costs in China at 21% of its GDP, adding that the Chinese 3PL market hit $37.1 billion in 2006 and is growing exponentially.

“As China’s per capita income increases, 3PLs will need significant operations to support its domestic trade and logistics needs,” said Armstrong. “Menlo Worldwide has over 40 years of experience in China and with these acquisitions, is on track to become a significant provider in meeting those needs.”

Armstrong added that Menlo’s existing Chinese 3PL business includes distribution for multinational automotive manufacturers and equipment manufacturer IR-Bobcat.

“This acquisition will allow it to expand its relationships with key multinational accounts and develop new domestic Chinese business,” said Armstrong.”

This acquisition presents Menlo with myriad opportunities to grow and expand in China and represents what Menlo Worldwide President Robert L. Bianco said in a statement is the most strategic acquisition in the company’s history, due, in part, to Chic Logistics’ domestic capabilities and network, which, Bianco noted will enable Menlo to become a “major player” in the intra-China market, which he labeled as the next great growth engine for transportation and logistics.

In an exclusive interview with Logistics Management, Bianco said that more of Menlo’s customers are becoming active in the Chinese market and want proven local logistics management resources and a network in place to support their distribution and supply chain operations in China.

“This acquisition gives us that network and the expertise to meet those needs,” said Bianco. “It also accomplishes one of our strategic global goals, which is to give us a material presence, and a good, strong platform for growth in China.

In terms of things shippers can expect as a result of this deal, Bianco said that can expect an expanded service portfolio from Menlo that now offers them dedicated capability for intra-China transportation and logistics services. “We now have the ability to service needs for import/export traffic involving China, as well as local warehousing, transportation management and distribution inside the country.”

And with China poised as “the next great growth market for transportation and logistics,” this acquisition gives Menlo a solid foothold in this promising market.

“Chic Logistics is one of China's fastest growing logistics firms and is among the top 30 providers in the country,” said Bianco. “It also fills in a key component of our overall portfolio for the greater Asia-Pacific region: the ability to bring together a proven capability for intra-China logistics, along with a full package of services to manage the staging and flow goods throughout Asia as well as to and from Europe and the US.  The combination of this acquisition, along with our present footprint and the recent acquisition of Cougar Express Logistics in Southeast Asia, really set us up with the infrastructure, and a unique network of resources that directly addresses major needs for our customers in this region.”

While Menlo continues to make strides in Southeast Asia, it is not alone as Armstrong points out that Werner Enterprises, C.H. Robinson Worldwide, YRC, and Schneider Logistics have also made recent strides into the domestic Chinese market:

• Werner Global Logistics (WGL) was founded in 2006 to meet its customers logistics needs in China. Import/export services include: Ocean and air freight forwarding, Non-vessel operating common carrier (NVOCC) shipping, shipment consolidation/deconsolidation, and customs brokerage. WGL has established alliances with select Chinese logistics providers to provide inland distribution from major ports and warehousing and transportation services from 20 distribution centers throughout China;

• C.H. Robinson acquired Dalian Decheng Shipping Agency Co. in 2005., allowing it to establish an international transportation management presence in China. The company has seven offices: Dalian, Tianjin, Qingdao, Shanghai, Ningbo, Xiamen, and Shenzhen. In 2006 C.H. Robinson Worldwide acquired Triune Freight Private Ltd. and Triune Logistics Private Ltd.,  a third-party logistics provider based in India. Triune had 19 offices throughout India;

• In 2005, YRC purchased a China-based forwarder and took a 50% ownership in another. GPS Logistics and JHJ International Transportation added 1,400 employees and 82 offices in Asia for YRC and;

• today Schneider Logistics announced an acquisition of Shanghai China based BaoYun Logistics.

“The Chinese 3PL market dynamics are extensive,” said Armstrong. “The current environment is a myriad of national and provincial regulation that requires 3PLs to develop strong local relationships in order to succeed. These relationships will continue to be leveraged as China improves its domestic road and rail infrastructure and takes strides to make intra-China trade more efficient.”