Pssst… Wanna buy a forwarder?

Is DHL Global Forwarding up for sale? And, if so, who would/could buy it?

According to a Reuters report, quoting “two people familiar with the matter,” Deutsche Post-DHL is considering selling its forwarding operations or seeking to move them into a partnership or joint venture. And the buyer? According to Reuters’ sources, one potential buyer is Japan Post.

Rumor upon rumor, all based on unnamed sources. Is there reason to take it seriously?

We think so. That is not to say we believe that tomorrow will bring an announcement that Japan Post, or anyone else, has signed an agreement to acquire DHL Global Forwarding (DHLGF), but rather that, given the problems DP-DHL has had with its forwarding business lately, it would be surprising if the company were not considering a sale. “Considering,” of course, is not the same as “has decided,” but the problems at DHLGF run deep, and the parent company has made clear that something has to change.

As for Japan Post as a potential buyer, again, no real surprise. In an effort to internationalize its business base, Japan Post last year acquired Australian transport and logistics giant Toll Holdings for US$5.1 billion, and it may still have an appetite for more. And don’t forget that, In addition to operating Japan’s postal service, Japan Post Holdings controls the world’s biggest insurance company (by revenue) and thirteenth biggest bank (by total assets), so it can no doubt afford to buy DHLGF if it chooses to.

But this is all rumor, and even if DP-DHL does want to exit the forwarding business, many questions remain.

The first of which is, what about DP-DHL’s logistics division, DHL Supply Chain? Most big forwarders (think K+N, Panalpina, Expeditors, etc) combine forwarding and logistics services under one roof, but DP-DHL has built its current structure on four separate pillars – Mail (now including parcel and e-commerce), Express, Forwarding, and Supply Chain – the latter three of which were formed out of separate acquisitions and bolted onto Deutsche Post. Unlike the Global Forwarding division, DP-DHL’s Supply Chain division is profitable. Not on the level of the Express division, but still in the black. The Global Forwarding division, on the other hand, is bleeding red ink.

Comparing the financial performance of the three divisions over the first nine months of 2015:

• Express reported an operating profit of US$1.07 billion, and an operating margin of 10.7%.

• Supply Chain reported an operating profit of $273 million, and an operating margin of 2.3%.

• Global Forwarding, Freight reported an operating loss of $280 million, and an operating margin of -2.5%

Does DP-DHL see so little synergy between its forwarding and supply chain businesses that it feels comfortable getting rid of them? We don’t know, but as we said above, it would be surprising if such a move weren’t at least being considered.

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