CMA CGM - Comments

Scale is key to CEVA competing with the likes of Kuehne & Nagel (K&N) and despite a large acquisition premium, CMA CGM’s purchase of Ingram Micro’s Commerce and Lifestyle business, makes sense. The $3bn price paid looks to have a significant strategic acquisition premium. $1.7bn of annual revenue at an EBITDA margin of 8.5% (in line with K&N) => a multiple of 21x, K&N currently trades at around 13.4x 2021 consensus EBITDA (14.0x LTM). Notwithstanding synergies, this looks like a full price, although in the context of current cash generation it makes sense for CGM CGM to make hay whilst the sun shines.

- The acquisition includes 59 warehouses worldwide (CEVA operates 750) and an online logistics platform. The acquired business will fit into CEVA’s existing 3PL and 4PL business (see link below for a description of 3 and 4PL). CEVA already operates CEVA Matrix (a logistics and warehousing platform), we would expect it to migrate customers to either the Ingram system or the in-house platform over time.

- The purchase of physical warehousing assets and supply chain management IT platforms is part of the vertical integration of the shipping business. We do not know the level of traffic managed by Ingram already involves CMA CGM as a shipper, but we expect the use of CEVA is likely to be small given the competing business at the surface transport level.

- Shippers are trying to leverage the current chaos in global supply chains into greater integration of warehousing, and surface/sea shipping. Using technology to manage access to warehouse and transport assets is a lot cheaper than owning the assets themselves. However, scale is critical to having the most successful platform as some control of assets and capacity will always be needed.

https://www.warehouseanywhere.com/resources/3pl-vs-4pl-logistics-definition-and-comparison/