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Kintetsu pays more than expected for APL Logistics

February 18, 2015

Japanese freight carrier Kintetsu World Express is buying Singapore's APL Logistics for US$1.2bn, paying a higher than anticipated price for an overseas deal at a time of slow domestic growth.
Tokyo-headquartered Kintetsu Express said it had agreed to pay ¥144bn ($1.21bn) to buy all of APL's shares from its parent, Neptune Orient Lines (NOL). Its own capital and bank loans will be used to fund the deal, it said.
At the close of Tokyo trading on Tuesday February 17, Kintetsu Express was worth $1.5bn by market value. As of end-December, it had current assets of ¥119bn, including ¥50bn in cash and deposits.
Kintetsu Express joins Japanese companies ranging from beverage maker Suntory Holdings to telecoms firm SoftBank in announcing major deals around the world since the start of 2014 to counteract sluggish trading in Japan, often paying hefty premiums. In the latest high-profile example, camera and office equipment maker Canon made an offer last week worth $2.83bn for Swedish network video surveillance firm Axis, proposing to pay a premium of nearly 50 per cent to Axis' previous closing share price.
The expected APL Logistics deal value is far higher than the $750m to $900m range for which sources said Singapore-based NOL had been looking. Such a range would have valued the unit at ten and twelve times its earnings before interest, taxes depreciation and amortisation for 2013. The price tag may confound sceptics who had suggested offers for APL Logistics could be closer to $600m, due to weak global freight rates.
It was not immediately clear whether there was competitive bidding. CJ Korea Express, South Korea's largest logistics firm, had also been interested in a deal, according to a regulatory filing in October.
Kintetsu Express said it was attracted by APL Logistics' international reach and expertise in offering logistics services for the automobile and retail industries.
"By welcoming APL Logistics to our group, we expect to bolster our international air freight services in terms of both geography and products that we handle," it said in a statement.
NOL's group president and CEO Ng Yat Chung said the deal would help the company focus on improving its liner shipping business and improve its balance sheet.
Trading in NOL shares was suspended, while Kintetsu Express shares closed 4.6 per cent lower after a Nikkei report on the deal. NOL said Citi and HSBC were its financial advisers while Nomura Securities advised Kintetsu Express.