GXO Logistics (GXO, Financial) Inc. said it has reached an agreement on the key terms of a possible cash and share offer for Clipper Logistics plc (LSE:CLG, Financial)(CLPLF, Financial). The size of the deal is reportedly around $1.3 billion.
The board of directors for London-based Clipper has confirmed to GXO that, âshould a firm offer be made on the financial terms of the possible offer, it is minded to recommend it unanimously to Clipper shareholders, subject to the agreement of other customary terms and conditions,â according to a press release.
âOur two companies have highly complementary service offerings, customer portfolios, and footprints in the UK and Europe, and we are natural partners with a very strong cultural fit,â Malcolm Wilson, GXOâs CEO, told FreightWaves in a statement. âWe believe we can achieve very significant productivity opportunities by taking advantage of technology and infrastructure overlap in the joint enterprise.â
GXOâs stock closed on Friday at $81.21 per share, a dip of 3.57%, or $3.01. After hours, the share price dropped to $80.88.
The possible offer would see GXO acquire each of Clipper's ordinary shares for a combination of cash and new GXO shares, to be issued on the basis of the exchange ratio as defined below:
- 690 British pence ($9.03) in cash; and
- "Such number of new GXO shares as would imply a valuation of 230 pence ($3.01) based on the trailing GXO 3-month volume weighted average price and a trailing 3-month average USD/GBP exchange rate in each case calculated for the period ending on the last practicable date prior to any firm offer announcement."
Accordingly, on the basis of the exchange ratio set out above, the possible offer will imply a total valuation of 9.20 British pounds, or $12.05, per Clipper ordinary share. In comparison, as of Friday's close, Clipper's London listing traded around ÂŁ7.77 per share, while its U.S. listing traded around $9.79.
The deal would accomplish a lot by combining a pair of global supply-chain management powerhouses. Clipper helps run logistics for a variety of leading European retailers, such as Asda and Asos (LSE:ASC, Financial). At the same time, GXO, with clients like Apple (AAPL, Financial), Nike (NKE, Financial) and Nestle (XSWX:NESN, Financial), âoperates hundreds of warehouses around the world, and has said the purchase would add more eCommerce fulfillment customers and provide expertise in technology returns, bolstering the global reach in countries like Germany,â according to PYMNTS analysts. âIn addition, the cost savings from the combined companies would occur within two years.â
Supply chain management has, of course, been a major issue for international retailers and logistics partners for many months as a result of the Covid-19 pandemic. In October, GXO and Saks announced that the new GXO e-fulfillment center in Middletown, Pennsylvania has begun shipping directly to customers nationwide as part of an innovative strategy to meet the surge in demand for luxury fashion heading into the holiday shopping season. The e-fulfillment center represents the first time the two companies have collaborated.
The cash and stock deal represents a premium of 18% to Friday's closing price. GXO is âintending to offer a mix and match facility to Clipper shareholders under which Clipper shareholders may elect, subject to availability, to vary the proportions in which they receive new GXO shares and cash in respect of their holdings in Clipper shares,â Yahoo noted.
The release noted that the total value of the possible offer at the point of announcement of a firm offer may be different from that implied by the exchange ratio. âFor example, if the exchange ratio were to be determined on the day of this announcement the possible offer would, using the price of a GXO share at the close of business on 18 February 2022, value each Clipper ordinary share at 901 pence (US$11.80)."
