CMA CGM’s proposed acquisition of Bolloré Logistics could be “poison” for small and medium-sized freight forwarders, squeezed in an ever-tightening market sector.
According to Xeneta chief analyst Peter Sand, major carriers like CMA CGM and Maersk are continuing to “enter the traditional home turf of freight forwarders”.
Now, in a deal valued at €5bn, the France-based transport group has offered a takeover bid to Bolloré shareholders, though the company is not publicly listed.
The acquisition would boost CMA CGM supply chain subsidiary Ceva Logistics’s volumes to 2m teu a year and bring their combined revenue to $24bn, based on its 2022 results.
Massive profits accrued by the major shipping lines over the past two years have seen carriers vertically integrate into sectors they have, mostly, steered clear of. Mr Sand warned: “It is poison when carriers start offering these services.
“The carrier offerings are likely to be at a very competitive rate, since they are optimising a larger network. Should CMA CGM acquire Bolloré, the space for freight forwarders to operate will be even tighter, and more competitive.”
Moreover, Mr Sand said, some carriers were refusing to sign long-term contracts with forwarders, “leaving them no other choice but to buy on the spot market”. That effectively undermined the forwarders’ traditional business model for anyone but the largest players, he added.
“Xeneta data shows very clearly that carriers offering a service beyond the ocean, do so with relatively low ocean freight rates, as the value of the services attached should make up the difference, lift utilisation of the ship and tie the customer closer to the carrier,” explained Mr Sand.
The addition of Bolloré Logistics would offer the French group expertise in high-value sectors in sea and air freight management and in contract logistics – “a game-changing acquisition”, according to CMA CGM.
Bolloré Logistics employs more than 14,000 staff and has 115 warehouses, which would add 900,000 sq metres of storage space to CMA CGM’s 10.3m sq metres mainly in France and Asia.
Bolloré Africa Logistics was sold to CMA CGM’s Swiss-Italian competitor, MSC, in December in a €5.7bn deal, described by one banking analyst as a “giant error” by the French carrier.
He said: “The Africa business represents a trick missed for CMA. Congrats to MSC for having the vision to secure a strategic business with good growth and significant barriers to entry.”
Nevertheless, he went on to say that Bolloré Logistics would be “a good fit for Ceva and the CMA liner business”.
The analyst added while Bolloré Logistics would cement the group’s market position in France, it may raise some antitrust issues.
“The main specialties seem to be pharma, luxury and aerospace and that suggests, of course, a close association with corporate France in terms of, for example, Sanofi, LVMH and Dassault. So I see this move as defensive mainly, as they’re already there. Also there must be some potential for efficiency savings in overlapping locations, system costs and services.”