P&O looks set to quit logistics
P&O confirmed last week that the contract logistics arm of P&O Trans European (P&OTE) is up for sale, after its financial adviser, Rothschilds, approached at least one unnamed private equity company about the purchase.
The move surprised many analysts who observed that contract logistics had been P&OTE’s best performing division over the last few years.
But IFW has learned that the decision came after senior management concluded that the group does not have the resources to fund the future development of both its logistics and ports divisions.
A P&O source told IFW: “The basic point is that contract logistics business has been doing well and established itself with our customers, and is certainly able to cover their needs over the short and medium term.
“But many of these customers are becoming global in their presence, and we looked at the issue of how we move from a pan-European to a global presence. It became clear that the investment needed to make that step is very substantial.
“The ports business is an even more capital-intensive one and it was felt that the group couldn’t do both. Contract logistics needs a new owner which can provide that investment, ” he said.
City analysts have put wildly different valuations on the business, ranging from £100m to £165m ( t160m- t264m). One banker said: “It’s a poor-quality logistics business, with a lot of turnover and not much profit.
“The book value is £155m ( t248m) but I think they will be facing a significant writeoff.” Another argued: “£150m wouldn’t be too bad, but I seriously doubt whether they would sell it for around £100m.
“P&O has been criticised for being a conglomerate business, and if it can rationalise, it’s good to be seen to be doing so.” Transport companies rumoured to be looking at the business include Stinnes, UPS, FedEx and shipping lines looking to expand into overland logistics.
The P&O source said: “It would someone who needs to move to a pan-European structure. The business has got a strategic value to any contract logistics company that wants a strong European network.” P&OTE’s unit loads business will not be sold, as it remains P&O Ferries’ largest customer.
The source added: “There are clear organic links between ferries and unit loads but they will continue to run at arm’s length.” P&O last week also raised US$45m ( t49m) with the sale of four vessels from its bulk shipping subsidiary Associated Bulk Carriers (ABC).
P&O holds a 50% stake in ABC and intends to withdraw from the business when it finds a suitable buyer.
