Deutsche Post World Net (DPWN) announced that it today completed the acquisition of UK logisticscompany Exel plc. It also issued details of the new branding structure and unveiled new financial
expectations for 2005.The combination of the two companies creates the world’s largest ocean freight and contractlogistics supplier. DPWN is already the world’s largest express carrier through DHL Express andnumber one in air freight. DPWN paid 900 pence in cash and 0.25427 Deutsche Post shares per Exelshare. The transaction thus values Exel at 1237 pence (18.35 euros) per share, or 3.8 billionpounds (5.6 billion euros) as of closing on December 13. The new Deutsche Post shares, whichrepresent less than seven per cent of the equity capital, will start trading on the Frankfurt stockexchange today. Exel’s stock listing on the London exchange was cancelled as of December 13.
“This acquisition marks a historic step for Deutsche Post World Net. By bringing together thesetwo powerful, high-quality organizations, we are creating the largest logistics company in theworld. Our Group will set the future pace in the forwarding and supply chain industries, enablingus to serve even better the global needs of our customers,” said Deutsche Post CEO Klaus Zumwinkel.“The transaction has been carried out in a very positive and constructive atmosphere. Within a veryshort time, our two management teams have developed a deep understanding and mutual trust. Our toppriority now is to combine DHL Logistics and Exel in a rapid and efficient manner,” he added.
The enlarged logistics division will be headquartered in Bracknell, near London, and run by ExelCEO John Allan. It will operate under the DHL brand, using DHL’s red and yellow colours. After themerger, DHL will thus operate with two logistics brand areas: DHL Exel Supply Chain and DHL GlobalForwarding. The re-branding will start in the first quarter of 2006.
DPWN said it has already identified the second and third management levels of the new logisticsdivision. The merger of DHL Logistics and Exel is expected to take two to three years, with thebulk being completed within the first twelve months. The transaction is expected to be modestlyearnings enhancing before alignment costs for the group in 2006. In the second year, it will beearnings accretive including expenses. The Group expects to achieve 220 million euros in annualgross cost synergies by 2008.
Upon completion of the Exel transaction, Deutsche Post World Net is raising its 2005 target foroperating earnings (EBIT). The company now expects EBIT for the 2005 business year, excluding Exel,to reach at least 3.7 billion euros. The previous target was operating earnings of at least 3.6billion euros. Due to new legislation governing the Postal Civil Service Health Insurance Fund, thecompany is seeing a favourable development in its health care expenses leading to an extraordinarygain amounting to one billion euros in 2005. From this amount, some 700 million euros will be setaside for further optimization measures including the creation of the new Global Corporate ServicesDivision. Some 300 million euros will be booked as a one-time gain in 2005. The future reduction inthe area of health care costs will amount to 70 million euros annually.
For the MAIL Corporate Division, the Group as before sees EBIT for the 2005 business yearstabilizing at around 2 billion euros. In the EXPRESS Division, Deutsche Post World Net foreseesoperating earnings, including the Americas region, of around 500 million euros in 2005, animprovement of approximately 130 million euros compared with the previous year. In the U.S., theSeptember combination of two hubs led to additional expenses. Thus, the company nowexpects the EXPRESS Americas unit to post a 2005 loss of less than 400 million euros, animprovement over 2004 of about 100 million euros. Due to the positive development in the LOGISTICSand FINANCIAL SERVICES divisions, the Group anticipates earnings to improve by around 10 percentcompared to the previous year. Previously, it aimed at earnings growth in the two divisions ofbetween 5 and 10 per cent.
