The Rush to Buy Exel

Institutional investors were driving the share price of U.K.-based third-party logistics company Exel in anticipation of the company’s acquisition by Deutsche Post World Net (DPWN). With $11.6 billion in group revenues (2004), Exel reported an operating profit of only $3 million after exceptional operating costs and goodwill amortization. Profits before the goodwill write off were $334 million or £181 million in 2004 vs. £154 million in 2003.

Exel, which has over 111,000 employees in 2,000 locations in over 135 countries, claims its customer base includes 75% of the world’s largest publicly traded companies. The firm was recently declared the largest global provider of logistics services by Transport Intelligence. Its European Logistics Leaders 2005 showed the acquisition of Tibbett & Britten last year pushed the company ahead of TNT Logistics as the world’s largest 3PL.

DHL Solutions, DPWN’s 3PL operation, ranks fifth in the world, says John Manners-Bell of Transport Intelligence. The fragmentation of the European 3PL market suggests regulators will take little notice of the acquisition. According to Transport Intelligence, a DPWN acquisition of Exel would give it just 12.8% of the European market.

UPS, which had been rumored to be interested in Exel earlier this year, has a strong cash position and speculation of a bidding war for Exel places UPS as the lead prospect to challenge DPWN. UPS recently acquired Overnite Transportation, but the company has repeatedly asserted it will operate the less-than-truckload operation separately from its package business. As such, the integration is more on a marketing level than an operations level. This could leave the company clear to undertake a major acquisition.

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