Maersk Spends $3.6 Billion to Acquire LF Logistics

LF Logistics Gives Maersk Ground Exposure

Ocean shipping company A.P .-Moller- Maersk is buying LF Logistics (LFUGF) for $3.6 billion. Maersk is using some of the cash it built up from soaring ocean freight rates this year to make the purchase.

By acquiring LF Logistics, Maersk can expand into ground logistics and hopefully boost sales from products moving from Asia to the US. LF Logistics has a large network of warehouses in Asia. With the acquisition, the company also said it can gain more control in the last-mile delivery market.

Cargo Distribution Poised for Growth

LF Logistics, a unit of Hong Kong supply-chain management company Li & Fung, operates a network of 223 distribution centers located around Asia. It has over 250 customers including retailers and manufacturers.

While rates for ocean freight have set records this year as supply-chain chaos has led to delays, Maersk does not expect that to last for too much longer. With pent-up demand for goods in the US starting to ease, ocean freight rates should come down next year. However, distributing cargo on the ground is poised for more growth in Asia, which is why the LF Logistics acquisition could be profitable.

More Acquisitions Coming

Maersk expects the LF Logistics acquisition to close next year. In August the company spent close to $1 billion to acquire two ecommerce logistics companies. There could be even more deals coming down the pike.

While logistics accounts for about $10 billion of Maersk’s $60 billion in annual revenue, the company expects that to grow during the next five years. The company is projecting its logistics business will see annual growth of more than 10% eventually. The ultimate goal is to transform Maersk from a company that ships packages on cargo ships only to one that provides a full suite of logistics services to its customers.

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