Germany gives DSV a sweet deal on freight takeover
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Pierre Briancon
BERLIN, Sept 12 (Reuters Breakingviews) -Logistics giant DSV DSV.CO has managed to convince the German government that it shouldn’t pay too much for the jewel in the decaying crown of state-owned railway operator Deutsche Bahn. Its 14 billion euro acquisition of Schenker will enable the 35 billion euro Danish group to become the global leader in freight-forwarding, or arranging the transport of goods through air, sea or land. Berlin preferred an offer from an established player to a rival deal from buyout group CVC, which had the backing of Germany’s unions and appeared to save more jobs.
The 14 billion euro enterprise value that DSV is reported by Reuters to be paying for Schenker amounts to less than 8 times this year’s EBITDA, assuming the unit’s profit in the second half of 2024 roughly matches the first six months. That looks cheap compared to the Danish group’s multiple of 14 or even to Swiss rival Kuehne und Nagel, which trades at 12 times this year’s EBITDA, according to LSEG data. The 7% jump in DSV’s share price shows investors appreciate the bargain.
DSV has shown with its acquisition of Swiss rival Panalpina back in 2019 that it can be determined in implementing synergies. Those it can hope to extract from Schenker could be significant, estimated by JPMorgan at between 500 million and 1.6 billion euros. Even at the lower end, those savings could have a present value of 3.8 billion euros, once taxed at DSV’s rate and capitalised.
DSV’s offer trumped one of a similar size from CVC. The buyout group wasn’t able to convince Germany that it was offering a better future for the unit, in spite of strong union support and a pledge to save jobs. Perhaps the government thought an experienced owner would be better placed to steer Schenker through a global slowdown and possible trade wars. CVC’s financing of the deal, provided by the Singapore sovereign wealth fund GIC and the Abu Dhabi Investment Authority, may also have raised concerns in Berlin.
CVC also made a parallel offer that would have valued Schenker at up to 16 billion euros. But it came with a catch: Germany would have had to buy a 25% stake in the company. However, Deutsche Bahn has a 30 billion euro debt load and needs to invest massively in its decrepit railway network. It needs all the cash it can get. DSV’s shareholders seem to be happy to provide it.
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CONTEXT NEWS
Danish logistics company DSV won the race to buy Schenker, the rail logistics arm of German state railway Deutsche Bahn, sources at the railway and at the German government told Reuters on Sept. 11.
The sources said a preliminary contract for the transaction, worth some 14 billion euros ($15.43 billion), would be signed in coming days. The deal must be approved by DB’s supervisory board, mainly comprising government, parliamentary and union representatives.
DSV shares were up around 7% in morning trading on Sept. 12, at 1,340 Danish crowns.
Editing by Neil Unmack and Oliver Taslic
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