AP Moller Maersk has agreed to buy the logistics business of Hong Kong-based Li & Fung—controlled by tycoon brothers William and Victor Fung—for $3.6 billion in an all-cash deal that will boost the shipping giant’s presence across Asia.
The acquisition of LF Logistics will transform Maersk into a global integrator of container logistics, providing digital end-to-end logistics solutions to customers worldwide, Soren Skou, CEO of Maersk said in a statement. The acquisition will boost Maersk’s network of warehouses by about 40% to 549 facilities globally, creating one of the world’s biggest logistics firms competing with the likes of UPS and DHL.
“With the acquisition of LF Logistics, we add critical capabilities in Asia Pacific to support our customers long term growth in Asia Pacific as well as capabilities and technology we can scale in our contract logistics business globally,” Skou said.
The acquisition comes as the world’s biggest container shipping line is poised to report record profits this year, driven by a surge in freight rates amid a global supply-chain disruption caused by the Covid-19 pandemic. As part of the deal, Maersk and Li & Fung will also forge a strategic partnership to create a comprehensive range of end-to-end global supply chain services for their customers.
LF Logistics, which is 78.3% owned by Li & Fung and 21.7% owned by Singapore government’s investment firm Temasek Holdings, processes more than 1 million orders per week for over 250 clients globally across 223 distribution centers in China and around the region, according to its website. The company, which employs more than 10,000 people globally, generated about $1.3 billion in revenues last year.
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The transaction is expected to be completed in 2022, subject to regulatory approvals. Based on Maersk’s purchase price, LF Logistics’ valuation has more than doubled since the Temasek deal valued the business at $1.4 billion back in 2019.
“The divestment of LF Logistics will further simplify our business to focus on our core trading and supply chain digitalization capabilities, which have seen a strong rebound back to pre-Covid levels,” Spencer Fung, Li & Fung group executive chairman, said in a separate statement. “With Covid causing major supply chain disruptions, the importance of a diverse global supply chain network is more pronounced than ever, and Li & Fung is well positioned to serve our customers through our network of 50 export markets.”
Li & Fung—which was founded in 1906 as an exporter of porcelain and silk is among Hong Kong’s oldest companies—was taken private by Spencer Fung’s father Victor and his uncle William at the height of the pandemic in May 2020 in a deal valued at $930 million. It provides supply chain management solutions to manufacturers and retailers across the U.S. and Europe. Victor and William Fung had fallen off the list of Hong Kong’s 50 Richest in 2019.