DSV and Panalpina join forces

US$5.5bn deal set to complete today, with integration expected to take 2-3 years, and annual cost synergies of around $330 million expected by 2022.

DSV expects to complete its US$5.5 billion acquisition of Panalpina today, with the integration expected to take 2 to 3 years, generating annual cost synergies of around $330 million by 2022.

With the settlement, DSV confirmed that the previously announced board changes in Panalpina will come into effect: Kurt Larsen will become chairman, and Jens Bjørn Andersen, Jens H. Lund and Thomas Stig Plenborg will join the Panalpina board, “giving DSV full control over Panalpina”.

Andersen commented today: “We are very excited to welcome Panalpina’s customers, employees and shareholders to DSV. Our two companies will achieve more together, creating even more value for all our stakeholders. The settlement of the deal marks the beginning of the integration process, during which we will strive to provide the high level of service our customers know and rely on.”

DSV described Panalpina as “among the globally leading providers of supply chain solutions with approximately 14,500 employees in 70 countries”, adding: “The combination with DSV creates one of the world’s largest transport and logistics companies with a pro forma revenue of approximately DKK 118 billion and a workforce of 60,000 employees in 90 countries.”

Pending the approval at an extraordinary general meeting, it said DSV A/S will change its registered name to ‘DSV Panalpina A/S’. “As the integration progresses, all subsidiaries and operational activities, however, will be united under the DSV name and brand,” DSV said.

Commenting on the integration of the two companies, DSV said: “Today marks the kick-off for the integration process, starting with the intended appointment of CEO Jens Bjørn Andersen and CFO Jens Lund to Panalpina’s new Executive Board. Appointment of a new Executive Management Team is likely to occur within the next week.

“The integration will then move in to the regions and countries as well as global and HQ functions. The entire integration period is expected to take 2-3 years, with most of the operational integration being completed within two years.”

DSV confirmed that Panalpina’s CEO and CFO would be stepping down, and said the company would have more to say on other senior management changes next week.

The company said it hoped to maintain a high level of service to customers during the transition, noting: “DSV and Panalpina strive to provide a seamless customer experience across all geographies and in key industry verticals. This will not change going forward, and already strong customer relationships will benefit from increased vertical expertise, improved services and operational excellence.

“As we move forward with the integration, it is our firm intention that our customers continue to experience an uninterrupted, high level of service.”

DSV said that, excluding impact of IFRS 16, the total value of the acquisition transaction was “approximately CHF 5.1 billion, corresponding to DKK 35.1 billion. Including IFRS 16 impact, the enterprise value is approximately CHF 5.4 billion corresponding to DKK 37.0 billion”.

On synergies between the two companies, DSV said: “DSV expects to achieve annual cost synergies of around DKK 2,200 million. The cost synergies are expected to have full-year effect by 2022 and will primarily be derived from the consolidation of operations, logistics facilities, administration and IT infrastructure.”

It added: “The transaction is expected to be EPS (earnings per share) accretive (diluted and adjusted) by 2021. For full-year 2022, DSV expects that the operating margin of the combined entity will be lifted towards the DSV Group’s current level. Long-term financial targets will be communicated during 2020.”

An update, including expected timing of synergies, integration costs and outlook for 2019, will be communicated in connection with the release of DSV’s third-quarter 2019 interim financial report – on 1 November 2019.

Source: Lloyd’s