DSV stock rallies after winning the bid to acquire DB Schenker

Investing.com — Shares of Danish logistics giant DSV (CSE:DSV) jumped on Thursday following a report by Reuters that DSV had won the race to buy Schenker, the rail logistics arm of Deutsche Bahn, Germany’s state-owned railway.

At 8:33 am (1233 GMT), DSV was trading 7.8% higher at DKK 1,346.5. 

The deal, valued at about 14 billion euros, represents the most expensive acquisition by a Danish company to date.

A preliminary contract is expected to be signed in the coming days, pending approval from Deutsche Bahn’s supervisory board, as per sources, the report added. 

“We see this as positive given the recent debate from our marketing has been around this deal and synergies. We see the potential deal as likely to result in a share price re-rating,” said analysts from Citi Research in a note.

The board, which consists of representatives from the government, parliament, and unions, is set to hold an extraordinary session to review the transaction.

Union representatives on the board had initially opposed DSV’s bid, which was slightly higher than a rival offer from financial investor CVC. 

“We argued the deal will likely to bring EPS accretion of atleast 26% at 50/50 split between equity and debt,” Citi added. 

Union representatives on the board had opposed DSV’s bid, which was slightly higher than CVC’s, because they expected it to result in more lost jobs, the sources said.

However, the government, in its capacity as Deutsche Bahn’s owner, ultimately supported DSV’s offer.

DSV will emerge as the world’s largest freight forwarder by both volume and revenue once the acquisition is finalized, surpassing Swiss competitor Kuehne und Nagel, the report added. 

The acquisition is expected to boost DSV’s position in the logistics industry, complementing previous strategic acquisitions of companies like UTi, Panalpina, and Global Integrated Logistics (GIL).

Deutsche Bahn is selling Schenker, its most profitable unit, to raise funds for much-needed investment in its domestic passenger services, which have been facing challenges, and to reduce its debt, which stands at 30 billion euros.