Wednesday, September 26, 2012

C.H. Robinson goes on an acquisition spree

It appears the uncertainty of the global economy is creating mergers & acquisitions opportunities for those companies that are looking to expand either geographically or expand service offerings.

C.H. Robinson seems to be such a company that is able to take advantage of such opportunities. In just a matter of weeks, the company acquired its second company. This time, the target was US-based freight forwarder, Phoenix International.  "We see significant long-term opportunity in international forwarding as global trade expands, scale and technology continue to become more important, and shippers increasingly look to transportation providers to provide global services," C.H. Robinson Chief Executive John Wiehoff said in a statement.

It was a good acquisition particularly as C.H. Robinson, a large 3PL and truck broker derives the majority of its revenue via trucking; in fact over 75% of 2011 net revenues were from this segment alone.  Diversifying services is a smart move for the company that has long been known for its large network of motor carrier capacity in North America through contracts with more than 45,000 motor carriers.

While Phoenix International provides air and ocean freight forwarding services, its strength is in its ocean freight forwarding. According to C.H. Robinson’s conference call concerning the acquisition, 60% of Phoenix’s net revenues are from ocean freight forwarding. However, perhaps one of its weaknesses is its over-dependence on the trans-Pacific tradelane -72% of its total ocean volume is trans-Pacific eastbound. Still, it is company that was rumored to have attracted much interest from such companies as UPS and CJ Korea Express.

Not only is C.H. Robinson diversifying its service offering, it is also expanding its geographic reach into Europe. Earlier this month, C.H. Robinson acquired Poland's Apreo Logistics. According to a recent Ti brief (and blog entry), US logistics providers look to expand their reach in the European market, Apreo primarily provides truckload services – dry van, liquid and dry bulk and temperature controlled. In fact, temperature-controlled transport has been of special interest to C.H. Robinson. In June, the company opened its Rotterdam office specializing in temperature controlled logistics. C.H. Robinson noted at the time that temperature controlled transport was one of the fastest growing business segments for the company on the European continent. Besides truckload transport, Apreo also offers warehousing and air and ocean services.

While C.H. Robinson works to close the deal for its two purchases, other providers are likely scouting for acquisition targets whether for geographical expansion or for new service offerings. Current acquisitions such as UPS/TNT (still pending approval), FedEx/TATEX/Rapidao Cometa and now C.H. Robinson/Apreo/Phoenix, may lead one to ask if this is the beginning of a consolidation within the logistics and transportation industry?