Go global or go home!

9 Feb 2001 - By Staff reporter

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Alan Peat examines merger
mania on the local scene

THE MERGER era continues - the most recent that of JH Bachmann and Megafreight being merged under the ownership of Imperial Holdings, and a 40% management shareholding followed by UPS, Fritz and Emery.
It's a continuing global and local trend with the big, small or not at all concept being a regular part of international freight industry thinking. A scenario where globalisation demands that every forwarder be connected to a world-wide network if it truly wants to play the multi-national game.
In SA terms, all the main mergers and associations are motivated by the same need for the local companies to acquire access to that international arm.
And, of the top five largest (in employee numbers) SA forwarders, only one, Eagle Freight (the largest) has not acquired its international network through a form of merger.
The two Bidvest operations - Safcor Panalpina and Renfreight Circle - have created their double-barrelled names through mergers, although the Safcor example is rather unique.
According to m.d. Philip Womersley, no shares have yet changed hands.
But, he added, the new entity (Safcor Panalpina) is regarded, to all intents and purposes, as a wholly-owned subsidiary of Swiss-based Panalpina.
If, in a couple of years' time, it suited Panalpina to acquire a very large part of the shareholding - and if Bidvest were prepared to sell - then all the operational groundwork leading to the merger would have taken place.
And Womersley sees mergers as a vital part of the globalisation scene.
Go big, or go home, is the way he terms it.
The Renfreight Circle merger is of the more traditional kind - with Bidvest holding 80% and Circle 20%, and the Circle international presence supplying the global element.
Renfreight Circle m.d. Gareth Griffiths still feels that more mergers/takeovers are in the pipeline - driven also by foreign players' needs for SA representation.
You'll find more influence coming into SA - and it'll be more equity involvement than alliance.
The other biggie of recent times has been that of Grindrod merging into Ršhlig to form Ršhlig Grindrod, where ownership is held 42.5% by each of the companies, with the remaining 15% in the hands of m.d. Peter Krafft.
You have to become global if you want to survive, Krafft told FTW.
For purely SA companies, unless they've got one big agent overseas, they'll be left with different little agents in virtually every country.
There are going to be more-and-more of these global entities as time passes, Krafft added.
And it's the medium-sized companies that are most vulnerable. They don't, for example, have the money to put into the IT (information technology) and logistics developments that you need to compete on a world basis.
The only SA company that has done a reverse takeover, as it were, is what is now trading globally as UTi.
What happened, according to m.d. Tiger Wessels, was that the SA-based Uniserve consolidated its operations and acquired the international company, Union Transport.
And this is not the first time that Wessels has been the only SA forwarder/ investor to have done an outside acquisition.
The first time was back in the sanctions era when his then company, WTC, reversed into the multi-national US major, Burlington Express.
Slightly lower down the scale in terms of size, there has also been a merger in recent times between what was originally RTT - and the global airfreight specialists, Airborne Express.
This started, according to AE's export manager Pam MacDonald, when RTT saw a need for an international forwarding arm for exporters for which it was already doing road freight.
The first attempt, MacDonald told FTW, was GEO-Logistics.
But then there was a need for further expansion, and we went in with Airborne Express - especially because of the big advantage of AE's courier operation.
That saw a 50% buy-in to AE by the Fuel Group.
The international merger scene has also had its effect on the SA freight industry.
Danzas AEI - SA's largest forwarder in employee terms - is the recent result of German postal giant Deutsche Post building up its global logistics business portfolio in anticipation of its privatisation and listing on the stock exchange.
The most recent is still underway, with the US-based express delivery major UPS in the process of acquiring both Fritz Companies and Emery Worldwide.
The Fritz deal has already been finalised. The synergies of the two companies are obvious, said Fritz SA director Thore Saether..
But - at time of writing - the Emery purchase was still under negotiation.
Who's next in line in the merger trail?