A record logistics sector deal is set to help Germany's struggling railway operator Deutsche Bahn reduce its debt and improve its "financial sustainability."
Deutsche Bahn subsidiary DB Schenker is being sold to Danish logistics company DSV for €14.3 billion ($15.8 billion), the two companies announced on Friday, potentially creating a new market leader.
"The sale of DB Schenker to DSV marks the largest transaction in Deutsche Bahn's history and gives our logistics subsidiary a clear growth perspective," said Richard Lutz, the chief executive of Deutsche Bahn.
State-owned Deutsche Bahn has long been facing financial troubles and growing criticism for train delays. But DB Schenker - which has around 72,700 employees - has performed well when it comes to its bottom line.
Lutz said the whole sum would remain with the rail company and be used to reduce its debt of some €33 billion.
For DSV, the purchase marks a significant step towards gaining more market share. "Hand in hand and under one roof, DSV and Schenker employees will combine their strengths to create a true world market leader in the industry," declared DSV boss Jens H. Lund.
Measured by revenue, the new company would be larger than the biggest companies in the logistics market, including Swiss firm Kühne + Nagel.
The global logistics market is considered highly fragmented and even as a combined firm, Schenker and DSV would account for only up to 7% of the market, data shows.
DSV plans to finance the acquisition with around €4 to €5 billion from equity, with the rest coming from loans.
DSV employs about 75,000 people worldwide, according to its own information, and is currently considered the world's third-largest logistics company by revenue. With the acquisition, the group aims to strengthen its European operations in particular.
Together, DSV and Schenker will have revenues totalling 293 billion Danish kroner ($43 billion) and employ around 147,000 people in more than 90 countries, according to DSV.
Schenker is particularly strong in Germany, France and Spain. "The combination will ensure that we have a strong presence in all markets," Lund said.
Over the next three to five years, DSV plans to invest around €1 billion in Germany, mainly in combining existing duplicate infrastructure such as warehouses.
"Important central functions will remain in Germany, including the IT department in Essen," according to an internal DSV presentation seen by dpa.
However, it also states that between 1,600 and 1,900 full-time positions, mainly administrative, are expected to be cut in the medium term. Operational jobs are to be retained and expanded in the long term.
Concerns about significant job cuts during the takeover have troubled Schenker employees in recent weeks and months.
In internal communications, the general works council had favoured the bid of the second remaining bidder, private equity investor CVC Capital Partners.
"Since CVC does not operate a logistics business, no such job losses are to be expected," it stated. Now, employee representatives must will work to reach a socially acceptable solution with DSV.
Social commitments, including job protection agreements, are expected to be valid until 2027 following the DSV takeover.
With Schenker, Deutsche Bahn is parting with one of its few successful areas of business.
Deutsche Bahn was only able to return to profitability after the pandemic thanks to Schenker's performance.
In 2023, the logistics giant made a profit of €1.8 billion, pulling the railway back into the black at least operationally.
In the freight sector, Deutsche Bahn now only has the long-struggling DB Cargo unit.
The sale of Schenker is expected to be completed by DSV in the second quarter of next year, after it is approved by the Deutsche Bahn supervisory board, the government and the competition authorities.
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