French shipping company CMA CGM has announced plans to sell vessels and stakes in port terminals with the aim of raising cash in support of its acquisition of Swiss logistics company CEVA Logistics.
The company said it intends to raise more than USD 2 billion in cash by mid-2020.
The plan includes USD 860 million from vessel sale and leaseback transactions, of which USD 650 million already completed during Q3 2019 and an additional USD 210 million scheduled to close over the coming weeks.
CMA CGM said proceeds would primarily be used to pay down the loan contracted to acquire CEVA Logistics, with the balance currently standing at USD 200 million.
A further USD 968 million would be raised from the sale of stakes held by CMA CGM in ten port terminals to Terminal Link, a joint venture set up in 2013 and owned 51% by CMA CGM and 49% by China Merchants Port that currently holds stakes in 13 port terminals.
Terminal Link will finance these acquisitions through a capital increase of USD 468 million subscribed by CMP and a loan by CMP that in 8 years will be converted into a capital increase subscribed by CMA CGM. The transaction, which is subject to antitrust and other regulatory approvals, is expected to close in spring 2020.
Also, USD 93 million (of which USD 85 million immediately and USD 8 million in a four-year earn‑out) would be generated from the sale of a 50% stake in a logistics hub in India, which will be completed in the first quarter of 2020.
Lastly, an additional USD 100 million from stepping up CEVA Logistics’ receivables securitisation programme. The company has already locked in the renewal of its initial USD 450 million securitisation programme in Europe, the United States and Australia, which was scheduled to expire next spring.
CEVA Logistics integration proceeding according to plan.
The shipping major noted that a new Marseille-based operations center was enabling the group to generate revenue synergies with the signing of several new contracts.
However, CEVA Logistics’ exposure to the automotive and technologies industries is continuing to dampen demand in both the freight and the contract logistics services segments. In addition, the significant investments made to transform CEVA Logistics are also weighing on margins in the short term.
The company unveiled the cash-raising plan in its financial report for the third quarter of 2019. CMA CGM saw revenues rise by 25.8% year on year to reach USD 7.6 billion, while volumes carried were up 5.1% compared to the third-quarter 2018. The group’s profit in the third quarter represented USD 45.4 million.