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Maersk makes a $3.6 billion acquisition, while Logistics Operations are still being built.

London, Thursday, 23 December 2021

Maersk makes a $3.6 billion acquisition. Continued Construction of Logistics Ops A.P. Moller-Maersk Maersk continues to make significant progress toward its goal of becoming a global container logistics company, unveiling one of its largest acquisitions, which will propel the company into the top tier of global logistics firms. Maersk has agreed to buy LF Logistics, a Hong Kong-based contract logistics company with omnichannel fulfilment services, e-commerce, and inland transport capabilities in the Asia-Pacific area, for $3.6 billion.

Maersk has made a series of investments to develop its logistics operations, backed by record earnings from the shipping industry. It is part of a larger strategic ambition for the shipping sector, which unites enterprises to become a global supply chain end-to-end solutions provider. Maersk signed a new four-year arrangement with Unilever, the world's largest consumer goods company, for an international freight supply chain management relationship last week.

Others in the transportation industry have seen the push into the logistical side of the business. MSC announced earlier this week that it has launched a $6.4 billion deal to buy Bolloré Africa Logistics, a transport and logistics company in Africa. CMA CGM, Maersk, and Cosco were reportedly said to be interested in Bolloré Africa Logistics. Maersk revealed plans to buy companies in the logistics market in Europe and North America last summer, and it has been developing its APM Terminals operation, while other shipping companies have been investing in terminal operations as well.

"The purchase of LF Logistics is a significant and really strategic step forward in our mission to become the worldwide integrator of container logistics," Maersk CEO Soren Skou stated. "With the acquisition of LF Logistics, we gain essential capabilities in Asia Pacific to support our customers' long-term growth, as well as capabilities and technologies that we can scale in our worldwide contract logistics company."

LF Logistics has had remarkable growth since its inception in 1999. It now has a network of 223 warehouses in 14 Asian nations, with a total capacity of 2.7 million square meters and nearly 10,000 staff. Analysts expect revenues of over $1 billion and profitability of more than $250 million this year as a key supply chain partner for several multinational consumer brands in fashion, lifestyle, commerce, and consumer goods.

Maersk informed analysts that it expects the business to continue growing at a quick pace, with sales and profitability from LF Logistics operations expected to double in the next four years. By combining the operations, Maersk will have 549 warehouses around the world, boosting capacity by 40%. According to analysts, Maersk will overtake industry heavyweights UPS and DHL to become the world's seventh-largest contract logistics firm.

"With this step, we will strengthen our warehousing and distribution capabilities and respond to our customers' fast expanding need for contract logistics," stated Vincent Clerc, Maersk's CEO of Ocean & Logistics. "LF Logistics has created an unprecedented track record of executing a better omnichannel strategy for clients, guided by a customer-centric culture and well-executed operations, which is a unique position we can leverage to grow and operate fulfilment to customers across our network."

As part of the deal to buy LF Logistics, Maersk will form a strategic relationship with Li & Fung, the warehousing company's present owners, to develop logistics solutions. LF Logistics is a prominent supply chain partner for firms wishing to expand in the Asia-Pacific area, with a broad Pan-Asian network.

The transaction is expected to finalize in 2022, pending regulatory approvals. Maersk and LF Logistics will continue to operate as independent companies until all necessary regulatory clearances are obtained and the deal is completed.

(Researched, written and edited by: The Decision Maker)


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