Menlo Worldwide, the global logistics subsidiary of Con-way Inc., announced Sunday, Sept. 9, the signing of a definitive agreement to purchase Chic Holdings Ltd. and its wholly owned subsidiaries Shanghai Chic Logistics Co. Ltd. and Shanghai Chic Supply Chain Management Co. Ltd. Menlo is acquiring privately held Chic Holdings Ltd., a corporation registered in the Cayman Islands, and all of its assets and subsidiaries for a cash payment of US$60 million plus an undisclosed future earn-out incentive based on its performance.
Headquartered in Shanghai, Chic Logistics is a provider of domestic third-party logistics and transportation management services in The People’s Republic of China. The company has a full-service portfolio and network with 130 operating sites in 78 cities, providing coverage of China’s highly industrialized eastern sectors as well as the mainland’s interior provinces. One of China’s fastest-growing third-party logistics firms, Chic Logistics produced revenues of US$55.2 million in 2006, a 40 percent increase over 2005.
“Chic Logistics is highly respected within China as a superior operator with an excellent service reputation among customers,” says Robert L. Bianco Jr., president of San Mateo, Calif.-based Menlo Worldwide. “This is the most strategic acquisition in Menlo’s history. With Chic Logistics’ domestic capabilities and network, we immediately become a major player in the intra-China market – the next great growth engine for transportation and logistics.”
“Distribution and logistics management is an exceptionally dynamic market in China,” says Johnson Shen, chief executive officer of Chic Logistics. “Joining with Menlo will help us to accelerate growth, introduce more services for customers, and quickly build into new markets with international capabilities. Our clients see this as a logical and welcome step for Chic Logistics and our employees. It is a good match of two successful businesses with complementary individual strengths. Together we will offer a new, stronger business value to the market.”
Combined, the two companies will comprise more than 1,500 employees in China operating from 139 sites in 79 cities, with nearly 180,000 square meters of warehouse space under management. Menlo’s China operations will be based at Chic Logistics’ headquarters in Shanghai.
Bianco notes that the acquisition fills in a key strategic component of Menlo’s service platform not only for mainland China, but also for the broader Asia-Pacific region. The Chic Logistics acquisition, combined with existing Menlo operations in China and other parts of Asia and the earlier acquisition of Singapore-based Cougar Express Logistics with operations in Southeast Asia, positions Menlo with one of the industry’s strongest and most extensive networks for managing Asia-Pacific freight and logistics, Bianco says. The expanded Asia-Pacific network also will benefit the larger Menlo and Con-way enterprise operations in North America and Europe to provide more comprehensive global solutions to customers, he says.
“We believe there are many untapped or underserved areas where our combined resources can truly bring new, high-value logistics, trucking and supply chain solutions to China’s importers, exporters and domestic shippers,” Bianco says. “This acquisition will enable us to build on the foundation of an excellent company to profitably grow and realize the potential of this exciting and vibrant market.”
The boards of both companies have approved the acquisition, which is subject to fulfillment of customary closing conditions. Settlement of the transaction, which Menlo intends to finance with existing cash resources, is expected to occur during the fourth quarter. The acquisition is expected to be accretive to the earnings of Con-way Inc., Menlo Worldwide’s parent company, beginning in 2008.