An established name is back on the Canadian express courier scene after TransForce completed the acquisition of the domestic express business of DHL. The Montreal-based logistics company has resurrected the Loomis brand for its new division, which had disappeared after the takeover of Edmonton-based Mayne Logistics Loomis by DHL in 2003, the same year that DHL bought Airborne Express in the US.
The transaction marks the continuation of DHL’s retrenchment and establishes TransForce as the second-largest player in the Canadian market behind Purolator. It paid less than $25 million to DHL for an operation that generates about $275 million in annual revenues.
According to industry experts, DHL had largely maintained its share of the domestic market during its spell as a domestic player in Canada. Unlike its forays into the domestic scenes in the US, the UK and France, which burned through billions of Euros in losses, the Canadian venture was going steady. However, DHL management has systematically disengaged from acquisitions made a decade ago in pursuit of a global one-stop shopping provider role. It has pulled out of domestic operations in the US, the UK and France and announced a partial withdrawal from the intra-China express parcel business earlier this year.
“The one-stop shopping concept has been history since the UPS strike,” remarks Horst Manner-Romberg, managing director of MRU, a research and consulting firm based in Hamburg, Germany that focuses on the mail and express courier business. He adds that DHL’s results in those markets where it pulled out of domestic operations look positive and seem to justify those steps.
DHL spent about 10 billion ($14.2 billion) on its attempt to challenge UPS and FedEx on their home turf, and the losses associated with its forays into the domestic markets in the UK and France are estimated to be in excess of that amount. While the retrenchment reflects a focus on DHL’s core business as a provider of international express services, Manner-Romberg does not envisage a wholesale retreat of the company from domestic activities. He points to Blue Dart in India, which has been a “treasure chest” for the express firm.
“There are still markets to be considered, but the big loss makers are gone. These decisions will be on a case-by-case basis,” he says.
DHL still keeps its reach in Canada through a 10-year strategic alliance with TransForce, which the pair are broadcasting under their “The Power of 2” moniker, but observers regard this as a marketing manoeuvre rather than a strategy of substance. In any case, TransForce’s acquisition ought to instil a greater focus on North American business for the rebranded Loomis unit.
Gary Breininger, president of Breininger and Associates, a Toronto-based marketing services firm whose areas of expertise include the Canadian courier and small package sector, reckons that TransForce has inherited a turnkey outfit that needs to be tweaked in its operational set-up.
“I think what they have to reassess is the routing operations. Under DHL, that has been geared to their international business. They should get a greater level of flexibility if they are not tied to international departures,” he remarks.
He views the acquisition as a good fit for TransForce to round out its portfolio. “They have Canpar already, whose strength is on the ground. Later they added ICS to the family, whose core offering is a hybrid mail service – not as fast as courier, but faster than mail, at a mid-price point. They were missing something in express,” he says.
TransForce management was not available for comment for this article, but remarks made by chairman, president and CEO Alain Bédard at the announcement of the acquisition and the company’s previous history of takeovers indicate that there will be no effort to weld the Loomis unit together with other divisions in the near term and that the new kid on the block will have leeway to pursue its own course.
“I think every brand in the family will be free to sell its full portfolio,” reflects Breininger, adding that over time the parts will likely migrate to the constituent units.
In any case, TransForce’s management has yet another acquisition to digest. On Aug. 1, the company announced that it had bought the shares of Toronto-based Concord Transportation, an expedited carrier that specializes in trans-border activities in the LTL and truckload market with annual revenues above $35 million. It marks TransForce’s third takeover this year, after the US$248 million acquisition of Texas-based same-day delivery firm Dynamex in February and DHL’s domestic operation.
TransForce’s expansion drive is not over yet. “We intend to remain active, yet highly disciplined and selective when acquiring businesses in our key market segments,” Bédard declared at the presentation of the company’s second quarter results on Aug. 2.
Customers stand to benefit from the TransForce-DHL agreement, Breininger figures. “For shippers, it’s probably going to be a good deal. It makes a competitive market more competitive,” he said regarding the domestic scene. In the international arena, UPS and FedEx may make some inroads on the strength of their integrated offerings, but these should not be major changes in market share, he reckons.