Deutsche Post World Net completes acquisition of Exel
· Exel acquisition creates world's No. 1 logistics company
· Group delivers on long-term strategy
· Structure and top management of enlarged division confirmed
· 2005 earnings forecast raised to at least 3.7 billion euros
Deutsche Post World Net today completed the acquisition of U.K. logistics company Exel plc, becoming the global No. 1 in air freight, ocean freight and contract logistics. Just one month after Exel's shareholders welcomed the offer, the company's equity capital was transferred in its entirety to Deutsche Post World Net. The combination of the two companies creates a group with some 500,000 people and about 55 billion euros in annual sales.
"This acquisition marks a historic step for Deutsche Post World Net. By bringing together these two powerful, high-quality organizations, we are creating the largest logistics company in the world. Our Group will set the future pace in the forwarding and supply chain industries, enabling us to serve even better the global needs of our customers," said Deutsche Post Chief Executive Officer Klaus Zumwinkel. "The transaction has been carried out in a very positive and constructive atmosphere. Within very short time, our two management teams have developed a deep understanding and mutual trust. Our top priority now is to combine DHL Logistics and Exel in a rapid and efficient manner."
The future structure of Deutsche Post World Net's enlarged logistics division has already been confirmed and top management positions filled. Exel Chief Executive Officer John Allan will run the combined division, which will employ around 150,000 people, be headquartered in Bracknell, near London, and operate under the DHL brand.
John Allan said, "Strategically, this acquisition is a good fit as both organizations were looking to increase their geographical footprint to meet the challenges of globalization and growth in outsourcing. Now we will be able to provide customers with an even wider range of products and value-added services managed by a talented group of people. I am looking forward to leading the new division and working with new colleagues."
Deutsche Post World Net paid 900 pence in cash and 0.25427 Deutsche Post shares per Exel share. The transaction thus values Exel at 1237 pence (18.35 euros) per share, or 3.8 billion pounds (5.6 billion euros) as of closing on December 13. The new Deutsche Post shares, which represent less than seven percent of the equity capital, will start trading on the Frankfurt stock exchange today. Exel's stock listing on the London exchange was cancelled as of December 13.
Combination measures already started
Deutsche Post World Net has already identified the second and third management levels of the new logistics division. The merger of DHL Logistics and Exel is expected to take two to three years, with the bulk being completed within the first twelve months. The transaction is expected to be modestly earnings enhancing before alignment costs for the group in 2006. In the second year, it will be earnings accretive including expenses. The Group expects to achieve 220 million euros in annual gross cost synergies by 2008.
The enlarged logistics unit will operate under the DHL brand and use DHL's red and yellow colors. After the merger, DHL will thus operate with two logistics brand areas: DHL Exel Supply Chain and DHL Global Forwarding. The rebranding will start in the first quarter of 2006.
Outlook on Group Targets
Upon completion of the Exel transaction, Deutsche Post World Net is raising its 2005 target for operating earnings (EBIT). The company now expects EBIT for the 2005 business year, excluding Exel, to reach at least 3.7 billion euros. The previous target was operating earnings of at least 3.6 billion euros.
Due to new legislation governing the Postal Civil Service Health Insurance Fund, the company is seeing a favorable development in its health care expenses leading to an extraordinary gain amounting to one billion euros in 2005. From this amount, some 700 million euros will be set aside for further optimization measures including the creation of the new Global Corporate Services Division. Some 300 million euros will be booked as a one-time gain in 2005. The future reduction in the area of health care costs will amount to 70 million euros annually.
For the MAIL Corporate Division, the Group as before sees EBIT for the 2005 business year stabilizing at around 2 billion euros. In the EXPRESS Division, Deutsche Post World Net foresees operating earnings, including the Americas region, of around 500 million euros in 2005, an improvement of approximately 130 million euros compared with the previous year. In the U.S., the September combination of two hubs led to additional expenses. Thus, the company now expects the EXPRESS Americas unit to post a 2005 loss of less than 400 million euros, an improvement over 2004 of about 100 million euros. Due to the positive development in the LOGISTICS and FINANCIAL SERVICES divisions, the Group anticipates earnings to improve by around 10 percent compared to the previous year. Previously, it aimed at earnings growth in the two divisions of between 5 and 10 percent.