Global transportation M&A delivered an impressive start to the year. A total of 140 deals valued at US$67 billion were announced in the first quarter—the highest quarterly value on record.
In Q1 alone, deal value reached 84% of 2020’s total value (US$80 billion). Deal volume, on the other hand, was down by 30 deals compared to Q1 2020.
The record achievement was bolstered by a string of high-value deals changing hands in the quarter. A total of 13 deals were recorded with a value of over US$1 billion each—the highest on record
Canadian bidders ramp up activity
The largest of these deals announced in Q1 was Canadian Pacific Railway’s US$28.6 billion bid for Kansas City Southern, a US-based holding company that has railroad investments in the US, Mexico and Panama. The anticipated merger of the two railroad firms will create the first rail network connecting the US, Mexico, and Canada.
The merger is facing a rival bid of US$34 billion from another Canadian railroad group, Canadian National Railway. The intense interest in Kansas City follows the ratification of the US-Mexico-Canada agreement last year, removing trade tensions while boosting investment between the three countries. The deal is also emblematic of the drive to reinvigorate global supply chains following the COVID-19 pandemic.
SPAC craze reaches aviation
The SPAC boom reached the transportation sector in the first quarter, in the form of the US$1.9 billion merger between New York-based private jet charter firm Wheels Up partners and Aspirational Consumer Lifestyle Corp., a US-listed SPAC. Following the deal, Wheels Up partners will be listed on the New York Stock Exchange, becoming the first publicly traded private jet company. As part of the deal, Wheels Up also received US$550 million in investment from a group of investors that included Fidelity Management and T. Rowe Price.
The deal highlights the resilience of the private jet market amid the pandemic. While commercial airline traffic dropped by between 65-70% compared to pre-pandemic levels, private jets offered a safer means to travel.
Fundraising activity on the rise
The first quarter saw high-profile fundraising activity in the transportation sector, with three financing rounds of over US$1 billion taking place. The largest of these was US-based cold-storage specialist Lineage Logistics’ US$1.9 billion fundraising from a group of investors, including D1 Capital Partners, Cohen & Steers and Oxford Properties Group. The investment values the company at an estimated US$18 billion.
Lineage will use the funds to pursue additional acquisitions, with the company stating it has already closed 13 acquisitions from the start of 2020. It will also use the funds to invest in technology—particularly in the areas of automation and customer visibility.
In another significant investment of the quarter, Indonesian logistics and courier services firm J&T Express raised US$1.8 billion in the Series B+ funding round from a group of investors comprising CMB International Capital Corporation Ltd., ATM Capital, Boyu Capital Advisory Company Ltd. and Hillhouse Capital Management, Ltd.
The courier company, which has seen demand surge as consumers increasingly switched to online shopping, is said to be planning an IPO in the US. If the IPO goes ahead, it will be largest Indonesian company to list on a US stock exchange—surpassing telecommunications tower operator PT Indosat.
Outlook
As global COVID-19 restrictions continue to ease, M&A will play a vital role in supplying the much-needed investment the sector needs to get back on its feet—reinvigorating damaged supply chains, boosting global travel and driving innovation within the logistics industry.
The sector will continue to attract investor interest—from both traditional buyers and new ones. The increase of SPAC and fundraising deals not only highlights the increasing investor appetite for deals, but demonstrates the ways that the transportation industry is pursuing alternative means to achieve growth.