CMA CGM: No special forwarding favors for CEVA

CMA CGM: No special forwarding favors for CEVA

CMA CGM holds 33 percent of CEVA and is making a public share offer as part of a new, jointly developed strategic plan. Photo credit: Shutterstock.com.

CMA CGM chief financial officer Michael Sirat said CEVA Logistics will compete for the container line’s business along with other forwarders even as the CMA CGM Group launched a public tender offer for the logistics provider.

No special provision will be granted to the service provider, Sirat told JOC.com. “We are not going to give CEVA better rates than we give Kuehne + Nagel, for instance. Our plan is to protect our existing customer base of forwarders. Those forwarders will not gain anything from our acquisition of CEVA, but they will not lose anything, either.”

CMA CGM holds 33 percent of CEVA and is making its public offer of 30 Swiss francs ($30) per share as part of a new strategic plan that was developed jointly with CEVA. CEVA’s board of directors earlier recommended shareholders turn down the offer from CMA CGM — a recommendation made in agreement with the container line — believing the growth inherent in the company had increased the valuation above the offer price.

End-to-end logistics

Bringing CEVA into the group will allow the merged entity to offer customers integrated logistics solutions and reduce the volatility within its ocean transport business, but Sirat insisted that CEVA would be managed on an arm’s-length basis.

A complete CEVA acquisition will take the workforce of the CMA CGM Group past 100,000 and generate $30 billion in annual revenue, with the objective of increasing CEVA’s turnover by $2 billion to $9 billion, and almost double its earnings before interest, taxes, depreciation, and amortization (EBITDA).

CMA CGM’s strategic plan is to improve commercial synergies by proposing the CEVA offer to CMA CGM customers, and vice-versa, integrating CMA CGM’s logistics activity  — 1,200 people and $650 million in turnover — into CEVA to increase the logistics provider’s footprint in ocean freight forwarding and allow economies of scale, and provide cost reduction with pooled operations, such as purchasing and shared services.

Sirat said among the customers set to gain from the acquisition are retailers that would have access to end-to-end logistics services and greater logistics management.

“We have assets in our terminals operation [Terminal Link and CMA Terminals have 45 terminals worldwide], and CEVA has warehousing advance hubs, so we will offer warehousing at strategic locations very near the major markets,” he said. “We have warehousing hubs at Tangier in Morocco for Europe and in Kingston, Jamaica, for North America.

“While we can offer a terminal itself, we have not had the ability to manage complex logistics that CEVA can now help us with.”

Asked whether the one-stop-shop approach of CMA CGM and its competitor, Maersk Line, would increase risk for shippers committing all their cargo to one company, Sirat said no customer would place 100 percent of its volume with one liner.

“But we have some key customers that we effectively are in a very deep and strong relationship with, and for these customers, this is the next step,” said Sirat. He said CMA CGM is in discussion with long-standing customers on contracts and freight rates, and CEVA will be able to go further than that and have a discussion on their supply chain needs.

“Obviously, we are not going to require any exclusivity. If we are good, we expect to reinforce the relationship between those customers and ourselves.”

Rodolphe Saadé, chairman and CEO of CMA CGM, has made logistics a major focus since taking over the company in 2017, and digitalization is a key part of that development strategy.

“The shipping business was not exactly at the forefront of digitalization,” Sirat said. “There is still a lot of paper in this industry. But this is a start of the move towards digitalization. We want to acquire more customers online and deal with them purely online.”

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.

Comments

agreed to what SIRAT said global shipping industrial (container trans) used to by dominated by Carriers ( since 1976 ) as Containers trans by line haul service has been playing a vital role in the physical operations while FFW ( they called themselves as logistics providers today, ) including warehouse operators, customs brokers , tractor operators or ...has been providing for service ( to BCOs ) which carrier don't or not able to do (such as customs broker functions, warehouse, LCL consolidations service...) so called end-to end service ... cannot understand why market is over high-lighting the functions of freight forwarders like CEVA, like KN , ...