Gianluigi Aponte is setting sail for uncharted waters. A shipping boom has helped the 83-year-old Neapolitan founder of privately-held Mediterranean Shipping Company (MSC), known within the industry as the “Captain”, to build the world’s largest container line by fleet capacity. The tycoon now needs dealmaking to counter a looming industry downturn. Betting on logistics and rail makes sense, but the M&A spree may prove expensive.
Switzerland-based MSC, which now sports a bigger fleet than $32 billion Denmark-listed rival A.P. Moller-Maersk MAERSKb.CO, is tightly controlled by Aponte and his two children. Their finances are the sea industry’s best kept secret. Still MSC’s revenue is likely to have more than doubled between 2020 and 2022 to $69 billion, with net income up to $26 billion last year from just $2 billion in 2020, shipping expert John McCown told Reuters Breakingviews. That’s because a shortage of containers during the pandemic sent maritime freight rates to record highs. Maersk, which will end in 2025 a 10-year vessel-sharing agreement with MSC, had a similar earnings trajectory.
The tide may soon turn. A surplus of available containers has depressed prices while demand is dwindling because of a cost-of-living crisis. Industry analysts predict container shipping companies will face severe losses, that may lead to industry consolidation.
To counter the trend, the Apontes are on a mission to diversify their business. Last year MSC paid 5.7 billion euros to buy Vincent Bolloré’s African transport and logistics business. And it is now looking to double down in logistics with a possible investment in German transport firm TX Logistik, a unit of Italy’s state railway operator.
But MSC is also proposing to bet big on transporting people, rather than goods. It is discussing buying Italian high-speed train operator Italo-NTV, controlled by U.S. fund Global Infrastructure Partners, for 5.2 billion euros, according to daily Corriere della Sera. The Apontes could enjoy a steady cash flow from Italo, which has higher margins than Italy state-run trains amid growing passenger volumes. But the risk is they pay up to enter a less familiar field.
Assume the rail company has been able to deliver EBITDA growth of 47% a year since 2021, the same as its pre-covid rate. MSC’s bid would value Italo at 15.6 times its potential 2023 EBITDA of 333 million euros, according to Breakingviews calculations. That’s already higher than the 12 times EBITDA paid by GIP in 2018, when it acquired the group for 2.4 billion euros including debt. But if Italo grows more slowly then the multiple would be a lot higher.
Other potential MSC targets also look a bit random. Last year the Apontes considered an expensive bid for ITA Airways. Then they ended up investing in hospital chain operator Mediclinic. Sheltering themselves against the current shipping crunch makes a lot of sense, and the secrecy surrounding the Apontes makes it hard to read their next move. But there’s a fine line between sensible diversification and scattergun strategy.
CONTEXT NEWS
Switzerland-based Mediterranean Shipping Company (MSC) is in exclusive talks to acquire Italian high-speed train operator Italo-NTV from U.S. investment fund Global Infrastructure Partners, Bloomberg reported on June 22, citing people with knowledge of the matter. The deal could value the rail company at about 5.2 billion euros ($5.7 billion), Italian daily Corriere della Sera reported on June 27.
MSC is also negotiating with Italy’s state railway operator Ferrovie dello Stato (FS) the purchase of a 49% stake in German freight transport firm TX Logistik, which is part of FS’s subsidiary Mercitalia, Corriere della Sera reported on June 25. MSC and FS signed a partnership deal last year aimed at developing their respective operations in land-based freight.
MSC completed its 5.7 billion euro purchase of Bolloré Africa Logistics in December.
MSC teamed up with South Africa’s Remgro last year to buy London-listed hospital chain operator Mediclinic International for 3.7 billion pounds ($4.7 billion).
MSC overtook Denmark’s A.P. Moller-Maersk to become the world’s largest container line last year by fleet capacity, according to maritime consultancy firm Alphaliner. MSC’s fleet can carry roughly 4.3 million standard 20-foot containers, about 2,000 more than Maersk, according to Alphaliner.
Source: Reuters Breakingviews (Editing by Lisa Jucca and Streisand Neto)