One of the leading third party logistic companies,
C.H. Robinson Worldwide, Inc
) recently announced to acquire Polish freight carrier Apreo
Logistics S.A. The deal terms remain undisclosed.
Apreo specializes in truckload offerings that involve dry van
and temperature controlled freight transportation. In addition, the
company has warehouse facilities and deals in ocean and air freight
C.H. Robinson is expected to benefit from Apreo's gross annual
revenues of more than $100 million and a market base comprising
2000 customers. Apreo is also expected to add infrastructural
capabilities with 21 offices across Poland and a work force of 300
C.H. Robinson did not specify any timeline for closing the
acquisition but stated that the deal is subject to regulatory
approvals from the Polish Office for Competition and Consumer
Despite the looming economic backdrop and a slow down in the
freight demand, C.H. Robinson remains keen on expanding its
footprint via acquisitions.
Although the near-term outcomes are too early to project, we
foresee long-term synergies arising from these acquisitions. Given
the on-going Eurozone crisis and dwindling financials of small
European companies, industry big wigs like C.H. Robinson are
leveraging the opportunity of penetrating into a potential market
Since poor market conditions are weighing on the market value of
these companies, the acquisition cost remains comparatively lower.
Further, the European freight market remains highly fragmented and
mainly constitute small operators that cater to localized regions.
This makes them all the more susceptible to acquisition by larger
However, a large carrier like C.H. Robinson with substantial
financial and infrastructural facilities would like to seize the
opportunity of integrating its operations through various
acquisitions in Europe. The strategy can be well demonstrated by
the emerging expansion trend in the parcel delivery industry.
United Parcel Service, Inc.
), pursued expansions plans through multiple European acquisitions.
While, FedEx acquired Opek Sp. z o.o., a Polish courier company and
TATEX, a French B2B Express transportation company. United Parcel
Service bought Kiala, a European consumer delivery company and is
also on the verge of completing the acquisition of Dutch shipping
company TNT Express.
However, over the near term, heavy capital expenditures involved
in funding acquisitions can lead to financial distress. The
company may finance its acquisitions either with available cash,
issuing equity or raising debt. In such an event, the key concern
would either be the liquidity position of the company or the
margins, which may be weighed down by the rising interest burden
due to loans.
We are currently maintaining our long-term Neutral
recommendation on C.H. Robinson. For the short term, the company
holds a Zacks #3 (Hold) Rank.
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