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CMA CGM cements its CEVA position
American Shipper
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CMA CGM has moved a step closer towards full ownership of CEVA Logistics after increasing its stake to 33 percent, just shy of the one-third voting rights position that would trigger a mandatory takeover offer.

The carrier raised its stake in the logistics service provider a week after CEVA Logistics rejected a $1.5 billion takeover bid from rival DSV, saying the offer “undervalues its prospects as a standalone company.”

However, after the rejected DSV proposal, CMA CGM in a stand-still agreement pledged to not launch or trigger an offer for CEVA without the recommation of the board of directors in the next six months, other than submitting a superior offer to a takeover bid.

A CEVA statement today explained that, “The duty to launch a mandatory takeover offer is triggered only if a shareholder holds a position in shares of more than one third of the voting rights of a company.”

CMA CGM acquired 24.99 percent of CEVA shares following the logistics company’s initial public offering on the SIX Swiss Exchange in April. After the unsuccessful DSV bid, the carrier and CEVA modified a stand-still agreement that cleared the way for CMA CGM to raise its shareholding to 33 percent.

CMA CGM believes increasing its stake in CEVA will give the logistics provider the required stability to continue its transformation from a perennial loss-maker to a profi company. The other three principal shareholders of CEVA prior to the IPO were CapRe, Franklin Advisors, and Apollo Global Management, which collectively hold 15 percent of the share capital.

DSV’s view of its takeover offer was that it would provide CEVA shareholders with a solid premium of 50.7 percent above CEVA’s Oct. 10 share price on the SIX Swiss Exchange.

While CEVA has been unprofi in every year since its establishment in 2007 by venture capital firm Apollo Global Management — following the acquisition of TNT Logistics and the subsequent acquisition of US-based freight forwarder EGL — the logistics provider has been focusing on paring down costs and moving away from unprofi business.

According to its IPO prospectus, CEVA had chalked up cumulative net losses of almost $3 billion by the of December 2017. Although the company was forced to undergo a recapitalization exercise in 2013 to reduce its net debt by $1.6 billion, it still carried a net debt of $2.089 billion at the of December 2017.

CMA CGMs customer-centric vision
CMA CGM’s investment in CEVA is consistent with a customer-centric vision announced in March to move away from commodity container shipping and increasingly tailor -to- logistics solutions for customers. Although not identical, it bears similarities to the Maersk strategy of becoming a global integrator of container logistics.

When the acquisition was announced, Rodolphe Saadé, chairman and CEO of CMA CGM, said the companies would explore cooperation with the aim of providing a more differentiated and qualitative offering while integrating services beyond maritime transport.

Saadé hinted at a move beyond its core business last year, saying the company was aiming to expand into land routes with supply chain services the key to maintaining growth following the overhaul of the container shipping market.

Xavier Urbain, CEO of CEVA Logistics, said in a second-quarter earnings announcement that while it was still early days, the initial benefits from the deleveraging through the IPO were already materializing.

“We have increased business with some existing clients and are engaged in a number of promising discussions. In general, we have good momentum in business development. We are also making progress in developing our partnership with our new strategic shareholder CMA CGM,” he said.

Urbain said CEVA has won 10 percent more business across all business lines the first six months of 2018 compared with the same period in the year before. Revenue in the second quarter was $1,848 million, up 7.3 percent year over year, while earnings before interest, taxes, depreciation, and amortization (EBITDA) in the second quarter increased by $7 million to $77 million.

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