DSV buys Deutsche Bahn logistics unit in €14.3bn deal

DSV A/S agreed to buy Deutsche Bahn AG’s logistics unit at an enterprise value of €14.3 billion ($15.9 billion) in a deal that will turn the Danish company into the world’s largest freight-forwarder.

DSV on Friday signed an agreement to acquire DB Schenker in an all-cash transaction, the company said. The equity value is €11 billion, in one of the largest privatisations in Germany in years.

DSV, which was founded by 10 Danish truckers in the 1970s, grew through a string of acquisitions in the fragmented transport industry, including buying targets that were larger than itself. The takeover will be the first challenge for Chief Executive Officer Jens H. Lund, who took the top job earlier this year from Jens Bjorn Andersen, under whom the DSV share price jumped more than 10-fold over a 15-year tenure.

DSV said it will finance the deal over the next 12 months through a combination of a share sale of as much as €5 billion and debt financing.

“This is a transformative event in DSV’s history,” Lund said.

Based west of Copenhagen, DSV has built a reputation as a master integrator of its acquisition targets, often raising the group’s combined profit margin once the takeover has been digested. In late 2022, DSV finished the integration of its most recent large takeover, the $4.1 billion purchase of Kuwaiti logistics company GIL, and has since said it was ready to make a new one.

DB Schenker will represent a challenge for DSV’s integration team since the takeover target has about 73 000 employees — roughly the same as the Danish buyer has. Lund has often pointed out that DSV back in 2000 bought a company, DFDS Dan Transport Group, which at the time was four times bigger than DSV.

The combination of the world’s No. 3 — DSV — and No. 4 freight-forwarder adds some consolidation to a fragmented industry, often dominated by local players and with the top 20 only holding 30%-40% of the total market. The new company will overtake current leaders Deutsche Post AG’s DHL and Kuehne + Nagel AG to become the world’s largest with a market share of roughly 7%.

The statement confirms a Bloomberg News report from earlier this week that DSV was nearing a deal to buy Schenker, competing against buyout firm CVC Capital Partners Plc in the final stages of the bidding. Denmark’s AP Moller-Maersk A/S was also previously among those interested in buying, but dropped out in July.

State-owned Deutsche Bahn, which is struggling with poor infrastructure in its rail network, said Friday that it will use the proceeds from the Schenker sale to cut its debt “significantly.”

One of the key themes in the talks was the preservation of jobs in Germany. Verdi, the country’s most powerful labor union, last month made the unusual move of backing CVC’s bid, saying the private equity firm might fire fewer people after a takeover. DSV in response made additional job and investment pledges, according to Bloomberg News reports.

DSV said Friday it has “entered social undertakings” in relation to the the German employees, which will apply for two years after closing. It pledged to invest €1 billion over the next five years in Germany, “which will contribute to ensuring long-term growth and job creation.”

The transaction is subject to approval by Deutsche Bahn’s supervisory board and Germany’s transport ministry, as well as customary regulatory approvals.

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