Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
- DB Schenker generated €19.1b in revenues last year and adj. EBIT of €1.1b at a 5.8% margin.
- Pre-covid (FY19) - which excludes the benefits it's had on the jump in air and ocean freight rates from supply disruptions - it was bringing in €17b of revenues and ran a 3% EBIT margin.
- DSV ran a 11.8% margin in FY23 and was lower 7% pre-covid.
Even if synergies are there, leveraging up for a margin dilutive business is not great for credit. It will also drag it below competitors; Expeditors (10-11%), UPS (9-11%), DHL (7-8%), FedEx (7-8%) & Kuehne (7-9%). Most of those are local issues (see below), we've also included Maersk (6-7%) which is a more focused in shipping (but does offer the rest). We would note DSV has history of acquiring large business including margin dilutive ones (as it did with ~€4b acquisition of Panalpina in 2019 - successfully moving group margin higher in years following).
Full debt funding (unlikely) is eqv. to adding 3-turns onto current net 1.8x leverage. On how much rating downgrades this will bring, raters will eye deleveraging targets - which based on earnings call comments mgmt will bring in to try and hold onto A- ratings. We do question why mgmt has planned €760m in equity pay-outs this year if it is in the process of bidding for this. Still it has held onto A- ratings since 2018 indicating BS discipline.
On RV 1-notch seems priced. We don't have a firm view here only advising caution for those on the side-lines. Wait out potential supply, which on indicative deal size, should bring NIC's with them. As we said this is all still speculation based on reports (see herethe latest updates) it is bidding for DB Schenker and exposed to further uncertainty on if it will win over CVC and how it will split financing between equity/credit.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.