Japanese freight carrier Kintetsu World Express Inc is buying Singapore's APL Logistics for US$1.2 billion, paying a higher than anticipated price for an overseas deal at a time of slow domestic growth.
Tokyo-headquartered Kintetsu Express said on Tuesday that it agreed to pay S$1.6 billion 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.
The sale of APL Logistics to the Japanese company will enable NOL to concentrate on its core but troubled container-shipping business. The Singapore Company said the deal will “unlock the value of the logistics business for its shareholders and strengthen the financial position of the NOL Group”.
NOL said the sale price is 15 times APL Logistics’ EBITDA [earnings before interest, tax, depreciation and amortization] of $80m last year, with KWE winning a competitive auction for the unit with the highest bid price – and reportedly beating competition from the likes of XPO Logistics and Korean company CJ Express – and one that is considerably above the current market average for acquisitions.
The expected APL Logistics deal value is far higher than the US$750 million to US$900 million range that sources said Singapore-based NOL had been looking for. Such a range would have valued the unit at 10 and 12 times its earnings before interest, taxes depreciation and amortization for 2013.
The price tag may confound skeptics who had suggested offers for APL Logistics could be closer to US$600 million, due to weak global freight rates.
Temasek affiliated NOL, which also has $4 billion debt, has been looking at multiple options to cut costs, including handling back some of its leased ships and it had also sold its Singapore headquarters in 2012 for $300 million.