Advent to take majority stake in UK arm of Hermes parcels group

Pandemic-driven e-commerce boom provides backdrop to €1 billion deal. US private equity firm Advent International has agreed a deal with German mail order group, Otto, to take a majority stake in the UK arm of European parcel delivery firm, Hermes.

The buyout specialist will acquire 75% of the Leeds-based operator which last month announced that it was planning to increase its workforce by close to 50% and invest about £100 million this year to expand capacity as parcel volumes surge amid the continuing pandemic-driven e-commerce boom.

The value of the transaction, which also entail Advent taking a 25%  shareholding in Hermes Germany has not been disclosed.

The Financial Times (FT) reported that the combined purchase price of the two stakes is about €1 billion, quoting a person  familiar with the matter.

In a statement, Advent said: “The transaction will facilitate further investment by Hermes in technology and infrastructure and support the future growth of the business in the rapidly growing parcel delivery sector. The management of Hermes UK will continue to lead the business as an independent company, with ‘business as usual’ for employees, suppliers and customers.

“This follows a recent announcement by Hermes UK that it is looking for more than 10.5K ‘parcel people’ to join its business, to meet the huge demand created by people shopping at home during lockdown, and the continuing growth in the sector. Hermes UK predicts that parcel volumes will reach record levels during the Black Friday and Christmas period.”

Hermes UK delivers over 400 million parcels a year and the company has experienced sustainable double-digit growth for the past seven years, Advent underlined.

Commenting on the deal, Martijn de Lange, CEO at Hermes UK, said: “This is fantastic news for Hermes UK as we continue our upwards trajectory in the fast-growing and capital-hungry home delivery sector. The investment will enable us to remain independent and be agile and responsive to future market requirements. It will help to expedite the development of our capacity and technology, supporting the introduction of new innovative products and services that will greatly benefit our retail clients and their customers.”

The FT also quoted  Advent’s  managing director, Nick Rose, who said the deal “is part of a long-term investment play around the fulfilment of e-commerce.”The company “expects the peak [in demand] this year to be the largest peak to date.”

Advent’s current investments in the e-commerce and logistics sector include InPost, a company which provides secure self-service lockers for the collection, return and delivery of parcels.

The transaction with Otto Group is subject to approval by the boards and relevant antitrust authorities, Advent’s statement added.

Source: lloyd’s