Wincanton’s board endorses GXO’s acquisition offer

Following yesterday’s announcement that Greenwich, Conn.-based global contract logistics services provider GXO Logistics made a $965 million cash offer to acquire Chippenham, UK-based Wincanton, a supply chain solutions services provider across myriad vertical markets, it appears that Wincanton is receptive to the offer.

GXO’s offer to acquire Wincanton followed a $764.3 million offer made by CEVA, a subsidiary of France-based global ocean carrier CMA CGM, earlier this week, which followed an initial offer made in January for $716.5 million, noted a Wall Street Journal article. The article added that: “Wincanton earlier this week said it was considering a rival proposal and that was sticking with its recommendation of Ceva’s bid.”

But that sentiment appears to have shifted with Wincanton saying earlier today that the company’s Directors “welcome” GXO’s announcement, adding that they “are pleased that the public offer process, triggered by their recommendation of CEVA Bidco’s offer…is maximizing value and delivering a significant premium to Wincanton Shareholders.”

Wincanton went on to say that the Wincanton Directors intend to recommend unanimously the GXO Offer and have withdrawn their recommendation of the increased and final cash offer by CEVA Logistics.

“We have long been clear that Wincanton is a great business with a compelling strategy, strong customer relationships and excellent people,” said Sir Martin Read CBE, Chairman of Wincanton, in a statement. “Under the current management team, we have made positive progress and ensured that Wincanton is at the forefront of logistics innovation. The Board of Wincanton is pleased that GXO recognizes the very significant value inherent in this business and intends to recommend the offer to shareholders for their consideration.”

Malcolm Wilson, Chief Executive Officer of GXO, said yesterday that Wincanton is a world class business, and GXO has long been impressed by their high-quality people and diverse customer relationships across key industries.

“The combination of GXO’s technological capabilities and global reach with Wincanton’s proven expertise in the UK and Ireland markets will enhance our offering for the benefit of both companies’ current and future customers,” said Wilson. “Our superior offer reflects our conviction in the value of this business and the opportunities the combined company will realize. GXO has a long heritage in the UK and a demonstrated track record of seamlessly integrating businesses in this market. We’re proud that our operations support the growth of UK companies, create high value jobs, and enhance the communities where we operate. As a focused pure play logistics leader, we are committed to investing in superior, differentiated logistics solutions, and we are confident that this combination will generate significant value for our shareholders, customers, and employees alike.”

GXO officials cited various drivers for how acquiring Wincanton would advance its position as a global pure-play contract logistics leader and also create shareholder value, including:

-expanding GXO’s presence in key strategic growth verticals, with the combination expanding GXO’s offering and customer base in a number of growth verticals in the UK, providing GXO with a springboard to offer industrial services across Europe;

-GXO’s market-leading service platform for aerospace and defense in the U.S., with the combined company enhancing service for UK customers in that vertical by leveraging GXO’s capabilities and expertise;

• allow for new and existing customers to benefit from a broader range of services and capabilities and an expanded global platform;
• Wincanton customers will have the opportunity to seamlessly globalize their supply chain operations across the 27 countries where GXO operates;
• improve operations for UK and Ireland customers through advanced technology, as GXO prides itself on its technology and automation, with combination allowing Wincanton customers to enhance the efficiency and resilience of their fulfilment operations through advanced tech deployment;
• create significant value for shareholders and provide additional growth opportunities, with complementary service offerings, customer portfolios and footprints providing additional growth opportunities; and
• the complementary infrastructure and offerings will enable GXO to manage the combined company more efficiently, resulting in greater productivity and lower costs for the benefit of customers

GXO is comprised of more than 130,000 team members across more than 970 facilities totaling approximately 200 million square feet.

Should the deal for Wincanton come to fruition, it would not represent the first time GXO acquired a UK-based company. In February 2022, it acquired London-based Clipper Logistics plc, a provider of omni-channel retail logistics services.

Evan Armstrong, president of Brookfield, Wisc.-based supply chain consultancy Armstrong & Associates, said that as the U.K. is GXO’s largest market, in terms of revenue and second largest in contract logistics space with 303 warehouses covering 42 million square feet, helped by its May 2022 purchase of U.K.-based omni-channel retail logistics provider Clipper Logistics plc, the Wincanton deal only solidifies GXO’s foothold in the region, where Wincanton covers over 16 million square feet of contract logistics space. 

“GXO and Wincanton align with a lot of the same verticals; however, there isn’t much overlap in customers, especially those with long-term relationships,” he noted. “In addition, both companies closed on e-commerce fulfillment deals in recent years. In September 2021, Wincanton acquired Cygnia Logistics along with its 700 employees and four sites in the U.K.  Then last November, GXO scooped up PFSweb with warehousing space in the U.K. as well as in Belgium, Canada, and to a larger extent, the U.S., rounding out the service offering.”

TD Cowen analyst Jason Seidl wrote in a research note that his firm believes the synergies, for the deal, to be largely on the cost side, and agreed with Armstrong, in that the companies have some customer overlap, which he said will be cannibalized.

“The deal would allow GXO to grow into the smaller UK market which is largely an open-book driven model, which comes with minimal upfront cost for GXO (and less risk) and fixed margins, though upside is likely limited,” wrote Seidl. “GXO has previously spoken to a $450bn total addressable market of which $300bn is insourced with customers, thus implying a $150bn outsourced market. We believe GXO's U.K. market share is likely below the thresholds that would pose major obstacles to a transaction though the competition regulator is likely to undertake a review as was the case in the Clipper transaction.”

“GXO is the natural buyer for Wincanton,” said Ben Gordon, founder and managing partner of Palm Beach, Florida-based Cambridge Capital, and managing partner of Ben Gordon Strategic Advisors (BGSA), prior to Wincanton’s announcement today. “A combination would create a market leader in contract logistics across both sides of the Atlantic. A bidding war may continue, [but] I would expect that the Wincanton board would find the GXO offer to be the most compelling.”