Global logistics: YRCW completes acquisition of Shanghai Jiayu Logistics Co. Ltd.

Jeff Berman, Group News Editor -- Logistics Management, 8/19/2008

SHANGHAI, China and OVERLAND PARK, Kan.— Less-than-truckload transportation services provider YRC Worldwide Inc. said today its subsidiary YRC Logistics—formerly known as Meridien IQ has officially closed its acquisition of Shanghai Jiayu Logistics Co. Ltd., a China-based provider of LTL ground transportation services.

Today’s news follows a December 2007 announcement in which YRCW said it had entered into a definitive agreement to acquire Shanghai Jiayu Logistics Co. Ltd. and a June 2007 announcement, when YRCW initially said it had entered into a preliminary agreement to acquire the company.

Shanghai Jiayu Logistics Co. Ltd has more than 30,000 customers, 1,800 employees, 300 tractors, 200 locations and a 3,000+ vehicle network. Under the terms of this transaction, YRC Logistics will acquire 65% of the stock of Jiayu for $44.7 million, according to an YRCW statement. YRC Logistics expects to purchase the remaining 35% interest in 2010 for an amount not to exceed $39 million, as determined by the level of Jiayu's 2008-09 financial performance, YRCW added.

"By virtue of Jiayu's mature network and well developed operational resources, we can help our customers to improve transportation reliability, compliance, data integrity and visibility for their shipments in China," said Bill Zollars, Chairman, President and CEO of YRC Worldwide, in a statement. "Shanghai Jiayu Logistics represents a key link in building an end-to-end supply chain capability."

And Jim Ritchie, President and CEO of YRC Logistics, told LM in a December interview that this acquisition was largely driven by its clients requesting service in other parts of the world that they receive in North America.
"When you look at the market information, it's obvious that many of our clients supply chains start in China," said Ritchie. "After looking at over 700 potential acquisitions, we targeted Jiayu Logistics as one of the largest transportation service providers in China."

Ritchie added that shippers in China will benefit from this deal in various ways, including: increased reliability from a well known, major service provider in China, which is now part of YRC; increased visibility through Jiayu's technology offerings and a global contact visibility tool tool YRCW is currently working on that Ritchie said will enable shippers to see their inventory down to the SKU level anywhere in the world; and improved reliability. 

"The transportation market in China is fraught with loss of shipment control and effective shipment management practices," noted Ritchie. "It's very common for a shipper to tender a shipment to an approved service provider, who in turn sub-contracts the shipment to an unknown service provider, who in turn sub-contracts again. In essence the shipper loses all visibility relative to who has their cargo, resulting in serious inefficiencies.”

Dick Armstrong, Chairman of Armstrong & Associates, a Stoughton, Wis.-based supply chain consultancy, said that this deal, which is one of three YRCW has made in China in recent years, can be viewed as a complimentary acquisition of sorts.

“They don’t seem to be shy at all about going after asset-based operations in China and building a presence that is going to require some assets to do business,” Armstrong told LM in a previous interview. “I think this [deal] means that YRCW is really serious about being in the transportation markets in China, and they plan on doing significantly more than to simply have a presence in China that allows them to take care of international traffic. This is a real indication that they are interested in the Chinese domestic market, and they will continue to move in that direction.”

• 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;
•  in September, Schneider Logistics announced an acquisition of Shanghai China based BaoYun Logistics.