Denmark-based logistics company DSV A/S (DE:DS81) confirmed reports that it has signed an agreement to acquire its rival Schenker from German state rail operator Deutsche Bahn for €14.3 billion (nearly $16 billion). The deal will make DSV the world’s largest freight forwarder in terms of revenue and volume. After rallying 11% on Thursday on the acquisition news, DS81 stock was down by more than 1% as of writing today.
Deutsche Bahn commenced the sale process for Schenker in December 2023 to reduce its debt and focus on its core business of rail transport and infrastructure.
Rationale Behind DSV’s Acquisition of Schenker
DSV believes that the Schenker acquisition will bolster its competitive position and global network. CEO Jens H. Lund is confident that the deal would enhance DSV’s competencies and expertise across all three divisions – Air and Sea, Road, and Solutions. The combined company is expected to have revenue of €39.3 billion (based on 2023 numbers) and a workforce of about 147,000 employees in over 90 countries.
The company aims to finance the all-cash acquisition of Schenker through a share sale of around €4-5 billion and remaining via debt financing. The completion of the deal is subject to approvals by the Supervisory Board of Deutsche Bahn, the German Federal Ministry for Digital and Transport, and other regulators. The acquisition is expected to be closed in the second quarter of 2025.
Previously, Germany’s powerful labor union Verdi raised concerns about the loss of jobs in the country due to this deal. To address such worries, DSV said that Germany will be a key market for the company. DSV intends to expand its presence in Germany and plans to invest €1 billion in the country over the next 3-5 years. Five years from now, the combined organization is expected to have more workforce in Germany than currently employed by Schenker and DSV.
Is DSV Stock a Good Buy?
Analysts at JPMorgan reacted positively to DSV’s acquisition of Schenker. They expect significant synergies from the deal to drive a multi-year growth story for DSV. Consequently, JPMorgan sees notable upside potential in DSV stock.
Overall, analysts are highly bullish on DSV stock, with a Strong Buy consensus rating based on seven unanimous Buy ratings. The average DS81 stock price target of €196.32 implies about 5% upside potential from current levels.
