Financial investor snaps up stakes in Hermes UK and Hermes Germany
Otto Group is selling a 75% stake in Hermes UK and a 25% holding in Hermes Germany to financial investor Advent International to help finance major investments as B2C volumes soar in both countries.
The deal ends long-running media speculation about a possible sale of Hermes to FedEx, France’s La Poste, Chinese e-commerce giant Alibaba or a different strategic investor.
Otto Group announced today that it had reached an agreement with “one of the largest and most experienced private equity investors” Advent International for the US-based financial company to take a 25% shareholding in Hermes Germany and 75% in Hermes UK. The value of the transaction, which is subject to approval by the boards and relevant antitrust authorities, was not disclosed.
Advent's stake in Hermes Germany also includes the other Hermes Germany Group companies, including BorderGuru, Liefery and Hermes Germany's share in the ParcelLock joint venture.
Following the transaction, the Otto Group will retain the majority of shares in Hermes Germany, and its core German market. In the UK, the Otto Group is relinquishing its majority shareholding in Hermes UK, while retaining representation in major strategic decisions.
The operational management of both companies will continue with their respective management teams. Cooperation with Hermes' business partners and clients will also remain unaffected.
The partnership with Advent will not affect Hermes' activities in Russia, France and Austria, the holding company Hermes Europe or the companies not involved in parcel delivery, namely Hermes Fulfilment, Hermes Einrichtungs Service, Girard Agediss, Hansecontrol and Otto International.
“Scope for essential investments”
The family-owned German group said the partnership “opens up new opportunities for the Otto Group's parcel logistics companies to expand their current leading position in the two most important delivery markets in Europe”.
Otto Group launched the search for “a strategic partner” for Hermes back in 2018, citing the need for long-term large-scale financial investments in the operational networks. It said at this year’s annual press conference on May 27 that talks were “well advanced” and a deal could be finalised this year.
The group said that Hermes has continuously strengthened its market position in both the UK and Germany in recent years. In the 2019/20 financial year, the companies transported more than 760 million parcels.
In the current financial year, both businesses are recording high volume growth against the COVID-19 pandemic backdrop. In response to this and in expectation of continued growth in the parcel delivery sector, Hermes is further expanding its staff capacity.
Kay Schiebur, Member of the Executive Board, Services, Otto Group, said: "The enormous interest shown by potential market partners in an investment reflects the attractiveness of the market segment and Hermes’ excellent market position in the two most important delivery markets in Europe.
“The partnership with Advent gives both companies further scope for essential investments and thus creates optimal conditions for further growth. Advent’s logistics expertise in areas such as locker delivery will also help us to further develop our business model.”
Schiebur added: "Thanks not least to massive investments in a powerful and flexible network, Hermes has shown in recent months that retailers and end customers can rely on unrestricted high quality delivery, even in an unprecedented environment such as the COVID-19 pandemic. At the same time, the parcel service once again shows how fundamental it is to have functioning competition in the market and the resulting choice for customers. We are pleased that we are now investing in even better delivery quality and additional services in partnership with Advent l and can thus continue on our successful path".
Ranjan Sen, Managing Partner and Head of the German Office at Advent International, commented: “Advent has significant experience in working successfully with family-owned companies and has previously enjoyed collaborating with the Otto Group with the takeover of the payment service provider Ratepay in 2017. We look forward to deepening this relationship and using our sector expertise to further grow Hermes’ potential in this highly competitive and rapidly growing business segment.”
Significant investment in the UK
For its part, fast-growing Hermes UK said Advent will partner with the current management team to acquire a 75% stake in the company, while Otto Group will retain a 25% stake.
Hermes UK, which delivers over 400 million parcels a year, will benefit from a significant investment by Advent that will enable it to invest further in technology and infrastructure and to support the future growth of the business in the rapidly growing parcel delivery sector.
CEO Martijn de Lange said: “This is fantastic news for Hermes UK as we continue our upwards trajectory in the fast-growing and capital-hungry home delivery sector. The investment will enable us to remain independent and be agile and responsive to future market requirements. It will help to expedite the development of our capacity and technology, supporting the introduction of new innovative products and services that will greatly benefit our retail clients and their customers.”
Advent stake in InPost
Advent already has extensive experience of successfully partnering with management teams to develop and grow market leading businesses. Current investments in the e-commerce and logistics sector include InPost, a company which provides secure self-service lockers for the collection, return and delivery of parcels that has seen significant growth since Advent’s involvement.
- CEP-Research will report on the Hermes deal in more detail tomorrow.