XPO to acquire majority of Kuehne + Nagel's UK logistics assets

Dive Brief:

XPO is acquiring the majority of Kuehne + Nagel’s non-core logistics assets providing "inbound and outbound distribution, reverse logistics management and inventory management," services in the U.K., according to a press release issued Monday. The deal is expected to close in the second half of this year and both parties have agreed not to disclose transaction details.
The deal brings XPO 75 of Kuehne + Nagel’s 83 logistics facilities in the country and a blue chip customer base, according to the release.
Kuehne + Nagel’s U.K. business brought in 500 million pounds ($650 million) in revenue in 2019 and revolves around the e-commerce, technology, and food and beverage industries.

Dive Insight:

Last year was a challenging one for the freight industry, trucking and logistics in particular, and a lackluster peak season motivated Kuehne + Nagel and XPO to shift strategies for 2020.

The asset sale is part of an ongoing review and consolidation of Kuehne + Nagel’s global logistics footprint. Currently, the company's European operations include 36 countries with 345 branches, 5,000 trucks and 7,000 trailers.

"One year ago, we first announced the strategic review of our contract logistics business to improve profitability and focus on our core, scalable solutions," Kuehne + Nagel CEO Detlef Trefzger said in a statement, calling the deal a major milestone in that effort. Kuehne + Nagel will retain control over its U.K. facilities serving aerospace, government and pharma clients as they are among the company's "scalable leverage areas," according to a press release.

In 2019, the company acquired two logistics firms, Jöbstl and Rotra, to bolster overland and cross-docking operations in Austria, Belgium, the Netherlands and Slovenia, a geographic and market segment that has performed well in recent quarters according to executives on the company's Q4 earnings call.

However, after an underwhelming peak season "we refocused again on cost and restructuring of our ongoing restructuring of our contract logistics business," Trefzger said on the earnings call. "You should expect a percent lower contract logistics footprint in the overall portfolio of our activities," he said.

After pursuing growth via targeted mergers and acquisitions, finalizing over 17 between 2011 and 2015, according to a Reuters report, XPO CEO Bradley Jacobs announced, "a review of strategic alternatives, including the possible sale or spin-off of one or more business units," in January. The company has not yet determined which, or how many units this could include, but said it does not intend to sell or spin-off its North American less-than-truckload business.

Despite considering the sale of some of its business units, XPO's latest acquisition from Kuehne + Nagel coincides with the decision to sign a long-term partnership agreement with Mercedes-Benz to, "manage UK parts distribution through an integrated, digitally-managed transportation network." XPO will invest in 42 new trucks running on 40 daily routes from Mercedes-Benz's European Logistics Center and XPO’s overnight delivery depots.