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C.H. Robinson Worldwide set to acquire global freight forwarder Phoenix International

By Jeff Berman, Group News Editor
September 25, 2012

Global logistics services provider and freight forwarder C.H. Robinson Worldwide Inc. said earlier today it has reached an agreement to acquire Chicago-based freight forwarder Phoenix International Inc. for $571.5 million in cash and about $63.5 million in CHRW stock.

CHRW officials said that the acquisition is subject to certain customary closing conditions and expected to close during the fourth quarter. The company said that this acquisition is the largest in CHRW’s history.

Established in 1979 by its executive chairman Bill McInerney, Phoenix is a privately-held international freight forwarder, providing international freight forwarding services, including ocean, air, and customs brokerage. For the fiscal year ending June 30, Phoenix had gross revenues of roughly $807 million, net revenues of roughly $161 million, and roughly $48 million in adjusted operating revenue. Phoenix has about 15,000 customers, 2,000 employees (860 in the U.S. and 1,000 in Asia) in 76 offices in 15 countries.

CHRW said that when the acquisition is completed McInerney intends to retire, and Phoenix CEO Stephane Rambaud will head up international freight forwarding services for CHRW and Phoenix.

On a conference call today, CHRW VP and CFO Chad Lindbloom said that 60 percent of Phoenix’ net revenue come from ocean forwarding service with 20 percent coming from air and customs, respectively.

Like CHRW, Lindbloom said Phoenix has a very diverse customer base, with its top ten customers comprising less than 10 percent of its business.

CHRW Chairman and CEO John Wiehoff said on the call that Phoenix is a quality, well-run business, with a strong track record, culture, and customer base that is very similar to Robinson’s.

In terms of strengthening Robinson’s global forwarding service offering, Wiehoff explained that Robinson itself began offering global forwarding services 20 years ago as part of its service portfolio, adding that bringing Phoenix into the fold puts it “in a new category” for scale and capability.

“Your networks, locations, and local relationships impact the scale of your offerings, and the Phoenix network will be a great addition to C.H. Robinson from a network standpoint,” he said. “Both businesses focus on people, process and technology; these are core competencies we have emphasized for a long time.”

For the last three-to-four years, Robinson has been talking about the significant technology investment it has been making in creating a global platform and integrating all of its services, especially its global forwarding services, around the world.

Wiehoff noted Phoenix also has strong IT capabilities, which offer upsides in terms of how CHRW can put a network together and have one of the best IT offerings in the marketplace.

“When we look at the two forwarding businesses and how the networks will fit together and the culture and the process we think…we will be competitively positioned in a way we will like,” he said.

In the coming weeks, Wiehoff said integration planning between the companies will be a major focus, with a sharp focus on customers and the marketplace that is part of what he said is a growth synergy strategy as CHRW cross-sells and expands its current relationships.

Both CHRW and Phoenix are very well-managed and competitively staffed from a productivity standpoint, said Wiehoff.

“Our current plan for when the businesses are put together is not to plan any meaningful people reductions or cost savings on the personnel side,” he said. “We believe we will be able to grow our business without having to add proportionate costs for some period of time. There will be cost leverage in the long run but in the short term we are going to be very focused on making certain our collective customers continue to experience the same great service and if anything we bring more to them from a relationship standpoint.”

Stifel Nicolaus analyst John Larkin wrote in a research note that this transaction almost doubles the size of C.H. Robinson’s forwarding business (pro forma annual TEUs now over 510K and annual airfreight tonnes over 90K). On a combined basis,  Larkin wrote that moves them ahead of UTi Worldwide to around 10th globally in terms of ocean freight forwarders, with CHRW less significant in airfreight.

The analyst also pointed out that the IT integration is an outstanding issue and potential risk to the forwarding operation. And he said CHRW will need to choose its own operating system or the Java-based one his firm believes Phoenix is currently developing.

“In our view, Phoenix likely has a better forwarding system, but management said…it likes one uniform system across the company,” said Larkin.

Earlier this month, CHRW announced it has agreed to acquire Warsaw, Poland-based freight forwarder Apreo Logistics S.A. Financial terms of the acquisition were not disclosed. CHRW said that the transaction’s closing is conditional on clearance from the Polish Office for Competition and Consumer Protection. CHRW officials were not available for additional comment.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


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