Corporate Consolidation
With CJ Korea Express trying to take over Daewoo Logistics, the company seeks growth enough to become a leading global logistics company. The company officially announced its intent to acquire Daewoo Logistics on April 20, posting, “Even though we have submitted a letter of intent to take over Daewoo Logistics, nothing is decided yet.”
Daewoo Logistics was separated from the Daewoo Group when Korea was on the brink of national bankruptcy for financial crisis in 1999. Daewoo Logistics has laid the groundwork for a full-scale general logistics company by being engaged in marine transportation including bulk ships, shipping, and warehousing.
Daewoo Logistics recorded 605.5 billion won (US$560.8 million) in sales and 18.9 billion won (US$17.5 million) in operating profits last year, which are the record high, showing a 40 percent increase and a 490 percent increase, respectively. The company has overseas networks in Japan, China, Singapore, Indonesia, and Myanmar, with years of business with Daewoo International and its expertise. Since the takeover cost is not that high due to the small size of the company, it is more attractive. Currently, the sales amount of Daewoo Logistics is estimated to be 300 billion won (US$277.85 million).
CJ Korea Express made another attempt to acquire a logistics firm in two months after it failed to take over Singapore's APL Logistics in February. In the bidding war for Daewoo Logistics, its competitor is highly likely to be POSCO, which has once tried to acquire the company before.
Based on its previous acquisition failure, CJ Korea Express has a strong will to use the takeover as a stepping stone to leap into a global logistics company. Through the M&A, the company is currently aiming to become one of the top five global companies with 25 trillion won (US$23.15 billion) of sales by 2020.
As CJ Korea Express merged with its distribution affiliate CJ GLS of the group in 2013, the company announced the plan to strengthen its business competence by investing a total of 5 trillion won (US$4.63 billion) in overseas M&A and infrastructure by 2020.
Accordingly, the company acquired Chinese delivery firm Smart Cargo, targeting the global markets based on the Asia-Pacific region. In particular, attention is being paid to whether it will take over large European distribution companies besides Daewoo Logistics.