Gantry cranes operate as containers sit stacked in Container Terminal 9 at Kwai Tsing Container Terminal in Hong Kong, China. (Photographer: Anthony Kwan/Bloomberg)

Panalpina to Seek Tie-Up With Agility in Logistics Deal

(Bloomberg) -- Panalpina Welttransport Holding AG is in talks for a tie-up with Kuwaiti logistics provider Agility, a deal that would help the Swiss freight forwarder bulk up and fend off interest from Denmark’s DSV A/S.

The talks are at a preliminary stage and Panalpina is still reviewing an approach by DSV, the company said Friday in a statement. Its shares fell in Zurich.

Negotiations about combining Panalpina and Agility are progressing and a transaction is backed by the Ernst Goehner Foundation, Panalpina’s biggest shareholder, people familiar with the situation said Thursday. That support could be key: The foundation, which owns 46 percent of Panalpina, rebuffed DSV’s unsolicited $4 billion offer this month.

A Panalpina-Agility merger would likely include a stock element, and Ernst Goehner plans to retain a stake in the combined entity, the people said. An agreement could be struck as early as this week, one of the people said, though others cautioned that talks could still fall apart.
The foundation said it “fully supports the company in implementing its strategy and realizing its full potential which includes to take an active role in the consolidation of the industry.”

Panalpina shares slipped as much as 4.7 percent and were trading 2.7 percent lower at 145 francs as of 9:22 a.m. in Zurich. DSV also traded lower, down 1.2 percent in Copenhagen.

Panalpina to Seek Tie-Up With Agility in Logistics Deal

Agility Public Warehousing Co. couldn’t be immediately reached outside of regular business hours, while a spokeswoman from DSV said she wasn’t immediately able to comment, when contacted by phone.

Market Skepticism

Panalpina has been bracing investors for a bold move to address doubts about its capacity to integrate a bigger player. Unlike DSV, it only has a track record of doing smaller deals. The firm is prepared to make a transformational acquisition that could be partly financed by selling debt, Chief Executive Officer Stefan Karlen said in a phone interview on Feb. 13.

The Basel-based company has a strong balance sheet, no debt and recently executed a swift, Swiss franc bond sale, Karlen said. “We have other sources as well which would support a transformational deal,” he said. He declined at the time to comment on DSV’s proposal as well as any specific potential takeover targets or merger partners, including Agility.

Lacking Experience

Some market watchers are skeptical.

Panalpina lacks the capacity for a large purchase and would be better off accepting DSV’s "very good" offer, according to David Kerstens, an analyst with Jefferies Financial Group Inc. The company has only focused on small acquisitions, it’s still rolling out its information technology system and its productivity is relatively low, Kerstens said in an interview earlier this week.

"They are not in a position to do large-scale M&A," he said.

For more: ‘Very Difficult’ for Panalpina Board to Turn Down DSV: Analyst

Kuwait-listed Agility is about the same size as Panalpina and more profitable, Berenberg’s Joel Spungin said in a Feb. 14 research note. It also has a number of large, strategic shareholders.

“The idea that Agility is a target is almost fantastical,” Spungin said. “It is marginally more likely that Agility may be a ’white knight’ bidder for Panalpina, or that it is prepared to consider some sort of joint-venture structure – but, we reiterate, only marginally so.”

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