Deutsche Post, Europe's biggest postal service, is set to announce today the $6.5 billion purchase of Exel, Britain's largest warehouse...
Deutsche Post, Europe’s biggest postal service, is set to announce today the $6.5 billion purchase of Exel, Britain’s largest warehouse and delivery company, people familiar with the plan said.
The deal would be Chief Executive Klaus Zumwinkel’s biggest acquisition yet and give Bonn-based Deutsche Post a huge lead in the worldwide logistics arena as it continues to expand beyond mail delivery.
The Berkshire, England-based Exel employs 111,000 people and generated sales of $11.4 billion last year.
“Deutsche Post wants to be a one-stop shop for logistics,” said Karl Green, an analyst in London at Dresdner Kleinwort Wasserstein, which has a “hold” rating on both companies.
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Seventy-three percent of the purchase price would be in cash, and the rest in new Deutsche Post shares, said the people familiar with the planned announcement.
Neither company would comment on the bid.
Any merger would have to be approved by German and British regulators.
The Wall Street Journal reported yesterday that United Parcel Service, though eager to strengthen international business, decided not to bid for Exel, believing the British company was too expensive.
Deutsche Post has some 380,000 workers. Logistics, which includes air and ocean freight, is its smallest unit and is concentrated on Europe’s slow-growing markets, The Journal said.
Exel is strong in the fast-growing logistics U.S. and Asian markets.
Zumwinkel, 61, is adding package-handling and supply-chain management services in the United States, Europe and Asia to prepare for the loss of Deutsche Post’s monopoly on German mail delivery in two years.
Among his major acquisitions were the $2.9 billion purchase of express-mail and freight company DHL in 2002 and the $1.05 billion purchase in 2003 of Seattle-based Airborne’s ground operations to gain a delivery network in the U.S.
Exel Chief Executive John Allan, 57, would run the combined logistics unit at Deutsche Post, the people familiar with the plan said.
Deutsche Post would pay about 16 times Exel’s 2004 earnings before interest and tax, according to data compiled by Bloomberg. That compares with the 20.6 times earnings that Deutsche Post paid for Airborne.
The recent acquisitions have yet to add to earnings. The U.S. unit of DHL lost $602 million last year and isn’t expected to break even until the last quarter of 2006.