Caterpillar Sells Majority Interest in 3PL to Private Equity Firm for $750 Million
This story appears in the May 21 print edition of Transport Topics.
Caterpillar Inc. has agreed to sell a majority interest in its third-party logistics business to privately held Platinum Equity for about $750 million, while retaining its in-house international network to support its dealers and customers.
Caterpillar on May 10 agreed to sell 65% of its Caterpillar Logistics Services LLC unit, with more than 130 locations in 23 countries, to focus more on its core heavy equipment and machinery businesses.
In addition to continuing to provide logistics support for its products, Caterpillar also is retaining a 35% interest in Caterpillar Logistics Services.
A sale or other restructuring of Caterpillar Logistics Services has been under consideration since March of last year.
“This is a big deal,” said Richard Armstrong, chairman of Armstrong and Associates, Stoughton, Wis. He said it was exceeded by just three worldwide acquisitions of logistics companies in the past five years.
The largest logistics company acquired in that period was the $2.2 billion purchase of Houston-based EGL Inc. in 2007. Sales of Geodis Inc. and ABX Logistics, both of which were focused in Europe and other overseas markets, were the others, according to data of Armstrong’s website.
Caterpillar in a statement said that the move supports the company’s “increased focus on the continuing growth opportunities in its core businesses.”
The company, which said it expects to complete the Platinum transaction during the third quarter, didn’t disclose additional details of the plan or say what might be done with the remaining 35% of Caterpillar Logistics Services.
The logistics business grew out of Caterpillar’s ability to service its dealer network, Steve Volkmann, an analyst at Jefferies and Co., told Transport Topics.
“This may not be the end of the story,” he said. “They still may move to sell the rest. This has been for sale for quite a while.”
Caterpillar has been concentrating its efforts on other manufacturing and machinery companies, he said, through purchases such as heavy equipment maker Bucyrus last year for $8.8 billion, a rail freight locomotive business formerly owned by General Motors and a German maker of construction equipment.
The company also has not commented on the profitability Caterpillar Logistics Services, whose financial results aren’t shown in company financial reports or regulatory filings. Armstrong said Caterpillar decided to sell off its logistics business because it wasn’t as profitable as other activities.
“The sale of the third-party logistics business would be a key step in the execution of our enterprise strategy,” said Stu Levenick, Caterpillar group president with responsibility for customer and dealer support.
Armstrong told TT that the logistics business with outside customers represented about one-third of Caterpillar’s total logistics activity. The other two-thirds of the activity, he said, are used to support its heavy equipment businesses.
Because the new operator of CAT’s logistics unit and the Peoria, Ill.-based heavy equipment maker will share the same facilities, Armstrong said that the parties could face difficulty in separating multiple operations within each of the locations.
Platinum is taking majority ownership of a business that currently is supplying more than 50 customers in industries such as automotive, where Caterpillar now provides logistics services to German automaker BMW.
Jacob Kotzubei, a partner at Platinum, said in a statement that the CAT unit will fit in smoothly.
“We have a lot of experience owning and operating businesses that provide complex supply chain solutions,” Kotzubei said in a statement.
Mark Barnhill, a partner at Platinum Equity, Los Angeles, listed two steel service companies, Ryerson and P&A Group, and SDI, which also has supply chain activities, as examples of the company’s expertise in managing logistics. Its Keystone Automotive unit also does logistics, he added.
