GXO Logistics and Clipper Plc reach terms on deal, for GXO to acquire Clipper

Earlier today, the boards of directors of Greenwich, Conn.-based global contract logistics services provider GXO Logistics Inc. and London-based Clipper Logistics plc, a provider of omni-channel retail logistics services, said that they have come to terms on a recommended cash and share acquisition, in which Clipper will be acquired by GXO.

Under the terms of the acquisition, GXO said that Clipper shareholders will receive 690 pence in cash ($9.26 USD) for each Clipper share and 0.0359 New GXO shares.

This announcement followed a news leak signaling this deal was occurring, which was followed by a February 20 joint statement issued by the companies saying that that respective boards announced in a joint statement “they have reached agreement on the key terms of a possible cash and share offer for Clipper by GXO.”

The statement added that the Board of Clipper confirmed to GXO that should a firm offer be made on the financial terms of the Possible Offer, it will unanimously recommend it to the company’s shareholders.

Clipper provides value-added, consultancy-led services for its blue-chip client base, noted the statement. And it noted that Clipper is a leader in the United Kingdom, with a long-standing customer base in various sectors, including: e-fulfillment, fashion, and high-value logistics. Clipper also has an increasing presence, in addition to the U.K., as it also has operations in Poland, Germany, the Republic of Ireland, the Netherlands, and Belgium. For the six months October 31, 2021, 68% of Clipper’s logistics revenue was generated from e- fulfilment and returns management activities and for the year ended April 30, 2021, 93% of revenue within UK logistics was derived from open book or minimum volume guarantee contracts, giving the business a high level of contractual certainty, the statement added.

GXO CEO Malcolm Wilson said that together, GXO and Clipper have a one-of-a kind growth opportunity, building on their shared commitment to a top-quality customer experience, innovation and industry leading expertise.

“Steve Parkin [Clipper CEO] and the Clipper team have created an exceptional business with outstanding capabilities,” said Wilson. “We will build on it. Our combined complementary customer portfolios and breadth of offerings in high growth areas will affirm GXO’s position as a leading pure-play logistics provider. We’ll strengthen our returns and repairs capabilities, expand our ecommerce customer base, and bolster our presence in key growth areas, including Germany, Poland and life sciences, and accelerate the expansion of GXO Direct to Europe. 

We believe our very strong cultural fit, deep familiarity with local industry dynamics and commitment to invest and grow in highly attractive markets will enable a seamless integration. On behalf of our more than 100,000 GXO team members, including 33,000 in the UK, I look forward to welcoming Clipper’s talented people to our organization. We’re very excited about the tremendous possibilities ahead and the value we can create for customers, employees, shareholders and the communities we serve.”

GXO cited various reasons for the strategic rationale to acquire Clipper, including:

• enhancing GXO’s position as a successful, innovative and well-capitalized pure-play logistics leader, in particular in the fast-growing e-commerce/e-fulfilment area;
• adding to GXO’s geographic presence in Germany and Poland as well as vertical presence in life sciences, which are key growth areas;
• Combines highly complementary service offerings, customer portfolios, and footprints in the UK and Europe;
• strengthening the combined business’s technology returns and repairs expertise;
• bringing together two natural partners with a very strong cultural fit (GXO is committed to protect and build on Clipper’s entrepreneurial approach for the benefit of both businesses and their employees);
• offering significant productivity opportunities, taking advantage of technology and infrastructure overlap in the joint enterprise;
• enhancing GXO’s ESG leadership position given Clipper’s reverse logistics and circular economy offerings and its robust internal targets to minimise carbon emissions and waste;
• unlocking very significant synergies, including compelling revenue synergies expected as a result of the significant opportunity to cross sell capabilities across a large, combined customer base, among others

As previously reported, news regarding this deal does not come as a major surprise, considering that XPO Logistics, whom GXO spun-off from to form a standalone company last year, significantly scaled up its service portfolio through various acquisitions going back to its inception in 2011.

What’s more, GXO Chief Investment Officer Mark Manduca recently told LM, following GXO’s fourth quarter earnings release, that 2022 M&A moves are viewed as a possibility in order to fill certain service niches or needs maybe expand into certain geographies.

“Things are on the table as we view those types of moves,” he said. “This business deserves acquisitions, and this business is sitting in a highly fragmented market, where the top five customers control less than 25% of the market share. We've got the balance sheet and the heritage to do deals and that's definitely part of our wheelhouse. I would say it is somewhere in the region of a low single-digit number of bolt on deals per year, maybe a mid-sized deal. We are going to be very return on invested capital-focused and what shareholders want in terms of a deal.”

Jeff Kauffman, principal for Stamford, Conn.-based Vertical Research Partners, wrote in a research note that Clipper would substantially increase GXO’s e-commerce and logistics fulfillment operations and bring in a number of new U.K.-based retailers, as well as growth the company’s life science logistics business and further expand into new markets such as Germany, Poland and Ireland.

“As an e-fulfillment company, we believe further that there would be meaningful synergy benefits in terms of technology systems and infrastructure integration opportunities, as well as a potential ESG benefit via the efforts that Clipper had already undertaken in the U.K.” wrote Kaufman.