Another 3PL Takeover?

Oct. 1, 2007
Some speculation centers on a private-equity takeover of the contract logistics and transport company. It's strong cash flow, despite a recent drop in

Some speculation centers on a private-equity takeover of the contract logistics and transport company. It's strong cash flow, despite a recent drop in profits, would be appealing. But, two factors come into play whether the company is being pursued by an operations company or a financial interest. One is the strong share position held by the Salvesen family (25% to 30%). The other is the tightening capital market following many institutions' exposure in US sub-prime mortgages.
Assets in warehousing could provide leverage for a loan for anyone acquiring the company.
Earlier, Christian Salvesen Foods announced it had won a 10-year contract with Birds Eye to provide pea processing and dedicated logsitics services. The £10 million ($20.4 million) investement with Birds Eye was slated to begin operations in May 2008.

In announcing the contract, Salvesen said, "This latest project strengthens the existing partnership between Salvesen and Birds Eye and provides cold storage, distribution and processing facilities at the factory to be built by Birds Eye. The company and Christian Salvesen Foods have a strong partnership that currently also provides processing and cold storage facilities in Lowestoft - an operation that has been working successfully for more than seven years."

Later, the company announced it was selling its processing business but, "The Christian Salvesen sites at Grimsby, Hull and Lowestoft, which provide contract processing and storage services and are reported as part of the UK Logistics business, are not included in this transaction and will remain with Christian Salvesen."

The company's official position on the potential takeover was explained in an official statement, "The Board confirms that it has received approaches from two parties which may or may not lead to a recommended offer for the Company. The indicative offer proposals received by the Board are subject to a number of pre-conditions.

The Board is currently continuing discussions and will provide an update to shareholders in due course. There can be no certainty that a formal offer for the Company will be forthcoming or as to the terms on which any offer might be made."

In other news, share prices for YRC Worldwide surged on a rumor that it was a potential target for takeover by Deutsche Post AG. YRC declined to comment on "rumor and speculation."

Deutsche Post World Net (DPWN), which operates DHL, has been expanding in the US since its acquisition of Airborne Express. It took on FedEx and UPS on the parcel/express side, but it lacks a less-than-truckload operation (which both UPS and FedEx have). One analyst commented it is unlikely DHL would acquire YRC while it is still working to build its service levels in the US. Other comments included the fact that YRC is engaged in negotiations with the International Brotherhood of Teamsters (IBT) on a contract that expires at the end of March 2008.

Transportation Management Inc. (TMI), which negotiates labor contracts with the Teamsters on behalf of member carriers, has already started negotiations on the 2008 contract. YRC subsidiaries Yellow and Roadway are among the carriers in the negotiations. The Teamsters just completed early negotiations with UPS on a five-year contract that will go to union members for ratification. In announcing that agreement and a local agreement covering the Indianapolis terminal of less-than-truckload carrier UPS Freight, Jim Hoffa, general president of the Teamsters, called it a model for organizing more of the freight transport industry, vowing at that time to undertake efforts to organize FedEx Freight, that company's less-than-truckload operation.

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