CMA CGM lines up offer to fully acquire CEVA Logistics

Roughly five months after Marseille, France-based global container shipping company CMA CGM said it reached an agreement to acquire a roughly 25% equity stake in CEVA Logistics, a global third-party logistics (3PL) services provider based in Hoofddorp, the Netherlands, CMA GGM this week stated its desire to acquire all of CEVA.

CMA CGM, who owns 33% of CEVA, said in a statement issued today that the “solicitation and offer to buy CEVA securities will only be made pursuant to an offer to purchase and related materials.”

Should CMA GGM successfully acquire all of CEVA, the company said that transaction would provide myriad benefits for CEVA to “accelerate its transformation” in various ways, including:

• Bringing CMA CGM’s operational expertise and its experience in corporate transformations to help CEVA achieve its recovery plan faster and more efficiently;
• Creating new commercial opportunities: as a leader in the sea transport sector with an international commercial network, CMA CGM will generate new opportunities for CEVA Logistics.
• Adding value to the commercial complementarities between CEVA Logistics’ and CMA CGM’s freight management activities: CMA CGM will transfer its freight management activities to CEVA Logistics, thus strengthening the company and creating economies of scale; and
• Supporting CEVA Logistics’ reorganization and development strategy: CMA CGM will support additional investments aiming - among other things- at implementing CEVA Logistics’ digital and IT transformation which will stimulate its commercial success and operational efficiency

“We are convinced of CEVA Logistics’ potential,” said Rodolphe Saadé, Chief Executive Officer of CMA CGM, in a statement.  This industrial cooperation will make it possible to accelerate its required transformation and to make it a more profitable and efficient leader in logistics for the benefit of its clients, its employees and its shareholders. It reconfirms CMA CGM as the reference shareholder as well as its long-term partner.”

CMA GGM said that the objective of its move in April to acquire 25% of CMA CGM was to “grow its presence in the logistics sector, which is closely related to shipping.”

CEVA is a major presence in the global 3PL market and had revenues north of $7 billion and is ranked fifth in contract logistics. It manages more than 9 million square-feet of warehouses in more than 750 global locations, and is ranked tenth on global freight forwarding, with a strong presence in Asia.

This global container shipping sector continues to find its footing, as it has dealt with myriad issues, including: overcapacity; industry consolidation; rates pressures, due to supply continuing to outpace demand for services, among other factors.

As previously reported, CMA CGM is not the only global container shipping company looking to spread its wings on the on the logistics side.

Earlier this year, Maersk said it intends to “transform” its logistics and supply chain model to compete with package delivery behemoths like UPS and FedEx and recently. But industry analysts maintain that shifting away from its core competency presents a major challenge in that global ocean carriers like Maersk lack the long-established shipper relationships on the same level that the industry’s largest global 3PLs and integrators do.  Part of the impetus for companies like CMA CGM and Maersk to branch out stems from the dynamic growth in e-commerce driving demand for more agile deliveries. 

Evan Armstrong, president of supply chain consultancy Armstrong & Associates, told LM earlier this year that this interaction could ultimately be more advantageous for CMA CGM.

“I would rate this 25% minority investment as an attempt by CMA CGM to get further upstream in the supply chain management process from tactical ocean shipping ‘to true global supply chain management and tap more strategic relationships with CEVA's customers,” he said. “From a CEVA perspective as a 3PL and the 14th largest ocean freight forwarder in terms of TEUs managed, this new relationship may provide it with better buy-side ocean pricing; however, ocean shipping is still in a overcapacity situation and rates continue to be fairly depressed. All in all, I think this will have more benefit for CMA CGM than CEVA. Apollo Management has been shopping CEVA for some time and this investment allows them to take some money off the table.”

Taking a bit of a historical approach, Ben Hackett, founder of maritime consultancy Hackett Associates, was somewhat skeptical of this planned arrangement.

“First, it was Maersk with its logistics arm Damson and now it is CMA CGM [with CEVA],” he said. “MSC may be the winner if they do not do the same.  When I first entered the maritime industry back in 1975, Overseas Containers LTD. In the UK tried to do the same, and I spent days going through manifests identifying forwarders and trying to work out who their clients were based on the cargo description.  Forwarders do not like the competition from carriers and mistrust them.  I once had a boss who had a saying: ‘Horses for Courses’ i.e. don’t put a steeplechase horse in competition in a race that is not a steeplechase.  Carriers can lose focus of their core business if they spread their wings too far.  As they are not managing their finances that well in their core business with very low ROI and EBITDAs, how do they expect to manage freight forwarders?”