GXO Logistics $GXO Possible Clipper Buyout Chatter

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On February 20, 2022, we are hearing increased chatter about a possible buyout of Clipper by GXO Logistics. The increased chatter about a possible buyout is coming from a statement regarding a possible offer press release.

Statement Regarding Possible Offer for Clipper Logistics plc

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION

THIS IS AN ANNOUNCEMENT FALLING UNDER RULE 2.4 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE “TAKEOVER CODE”) AND DOES NOT CONSTITUTE AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE TAKEOVER CODE AND THERE CAN BE NO CERTAINTY THAT ANY FIRM OFFER WILL BE MADE

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

On February 20, 2022, The Boards of Clipper Logistics plc (“Clipper”) and GXO Logistics, Inc. (“GXO”) are pleased to announce that they have reached an agreement on the key terms of a possible cash and share offer for Clipper by GXO (the “Possible Offer”).

The Board of Clipper has confirmed to GXO that, should a firm offer be made on the financial terms of the Possible Offer, it is minded to recommend it unanimously to Clipper shareholders, subject to the agreement of other customary terms and conditions.

Any announcement by GXO of a firm intention to make an offer for Clipper remains subject to the satisfaction or waiver (by GXO) of a number of customary pre-conditions, including, inter alia, completion of confirmatory due diligence, agreement of the detailed terms of the Possible Offer and finalizing the securing of debt financing.

Terms of the Possible Offer

The Possible Offer is to acquire each Clipper ordinary share for a combination of cash and new GXO shares (to be issued on the basis of the Exchange Ratio as defined below) as follows:

690 pence in cash; and
such number of new GXO shares as would imply a valuation of 230 pence based on the trailing GXO 3-month volume weighted average price and a trailing 3-month average USD/GBP exchange rate (the “Exchange Ratio”) in each case calculated for the period ending on the last practicable date prior to any firm offer announcement,
(the “Possible Offer Terms”).

Accordingly, on the basis of the Exchange Ratio set out above, the Possible Offer will imply a total valuation of 920 pence per Clipper ordinary share.

Clipper shareholders should note that the total value of the Possible Offer at the point of announcement of a firm offer may be different from that implied by the Exchange Ratio. For example, if the Exchange Ratio were to be determined on the day of this announcement the Possible Offer would, using the price of a GXO share at the close of business on 18 February 2022, value each Clipper ordinary share at 901 pence.

GXO is intending to offer a mix and match facility to Clipper shareholders under which Clipper shareholders may elect, subject to availability, to vary the proportions in which they receive new GXO shares and cash in respect of their holdings in Clipper shares.

GXO has received irrevocable undertakings to vote in favour of an offer (and to elect to receive 50 per cent of their consideration in shares) made on the financial terms of the Possible Offer from, in aggregate, the holders of 23,889,180 Clipper shares, representing approximately 23.31 per cent. of Clipper’s issued share capital, including from Steve Parkin, Executive Chairman, Tony Mannix, CEO, and David Hodkin, CFO, in respect of their entire holdings of Clipper shares.

The irrevocable undertakings remain binding in the event of a competing offer. Full details of the irrevocable undertakings are set out below.

A compelling strategic combination which significantly increases the opportunities for both businesses in the high-growth e-commerce/e-fulfilment areas, creating significant value for all stakeholders:

  1. Enhances GXO’s position as a successful, innovative and well-capitalised pure-play logistics leader;
  2. Combines highly complementary service offerings, customer portfolios, and footprints in the UK and Europe, enabling significant cross selling of capabilities across a large combined customer base;
  3. Brings together two natural partners with a very strong cultural fit; GXO is committed to protect and build on Clipper’s entrepreneurial approach for the benefit of both businesses and their employees and intends to safeguard the existing employment rights, including pension rights of Clipper employees;
  4. Offers significant productivity opportunities, taking advantage of technology and infrastructure overlap in the joint enterprise.
  5. Benefits for GXO shareholders:
  1. Enables enhanced offerings by combining GXO’s complementary capabilities with Clipper’s, including its technology returns and repairs expertise, enabling GXO to strengthen its offering to an expanded universe of clients in the fast-growing e-commerce/e-fulfilment area;
  2. Adds customers in the e-commerce/fulfilment space where GXO can leverage its existing platform to further diversify and expand its customer base;
  3. Significant cost synergies based on procurement, and other operational overlap that can be realised within two years from transaction close;
  4. Adds geographic presence in Germany and Poland as well as vertical presence in life sciences, which are key growth areas;
  5. Enhances GXO’s ESG leadership position given Clipper’s reverse logistics and circular economy offerings and its robust internal targets to minimise carbon emissions and waste;
  6. GXO believes the structure of the Possible Offer will allow GXO to maintain its investment grade credit rating.
  7. Benefits for Clipper shareholders:
  1. A highly attractive valuation, providing a material cash component, plus the opportunity for all Clipper shareholders to participate in the significant future potential upside of the combination through the ownership of GXO shares;
  2. Possible Offer represents a premium of approximately:
  3. 49% to the closing price of Clipper shares on 27 January 2022, the day before the Possible Offer was made;
  4. 28% to the Clipper share price of 720 pence on 10 February 2022;
  5. 32% to the Clipper 3 month volume weighted average price on 18 February 2022;
  6. 18% to the Clipper share price of 777 pence on 18 February 2022; being the last business day before this announcement.

This announcement is released by Clipper Logistics plc and contains inside information for the purposes of the Market Abuse Regulation (EU) 596/2014 (“MAR”). Upon the publication of this announcement, this information is considered to be in the public domain. For the purposes of MAR, this announcement is being made on behalf of Clipper Logistics plc by David Hodkin, Chief Financial Officer.

About Clipper

Clipper, which is premium listed on the Main Market of the London Stock Exchange, is an omni-channel retail logistics specialist, which provides value-added, consultancy-led services to its blue-chip client base. Clipper is a UK leader in its areas, with a long-standing customer base in e-fulfilment, fashion and high-value logistics.

For the six months ended 31 October 2021, 68% of Clipper’s logistics revenue was generated from e-fulfilment and returns management activities and for the year ended 30 April 2021 93% of revenue within UK logistics was derived from open book or minimum volume guarantee contracts, giving the business a high level of contractual certainty.

Clipper has developed specialist services to support its customers in their ever-complex supply chains and to ensure that product is ready for sale in the most efficient and cost-effective manner. It has developed a high value-add electronic product repair capability, which Clipper complemented with the acquisition of Netherlands-based CE Repair as announced on 29 November 2021.

In addition to its presence in the UK, Clipper has an increasing presence in mainland Europe, with operations in Poland, Germany, the Republic of Ireland, the Netherlands and Belgium.

For the year ended 30 April 2021, Clipper generated revenue of £696 million, underlying EBITDA of £43 million on an IAS 17 basis and £82 million on an IFRS 16 basis, underlying EBIT of £31 million on an IAS 17 basis and £40 million on an IFRS 16 basis. As at 31 October 2021, Clipper had net debt of £11 million on an IAS 17 basis.

About GXO

GXO is the largest pure-play contract logistics provider in the world and a foremost innovator in the logistics industry. It was a spin-off from XPO Logistics, Inc in August 2021 and is now separately listed on the New York Stock Exchange with a market capitalisation of $9.3 billion as at close of business on 18 February 2022.

GXO provides high-value-add warehousing and distribution, order fulfilment, ecommerce, reverse logistics, and other supply chain services differentiated by its ability to deliver technology-enabled, customised solutions at scale. GXO’s revenue is diversified across numerous verticals and customers, including many multinational corporations.

GXO’s customers rely on it to move their goods with high efficiency through their supply chains – from the moment inbound goods arrive at its logistics sites, through fulfilment and distribution and, in an increasing number of cases, the management of returned products. GXO’s customer base includes many blue-chip leaders in sectors that demonstrate high growth or durable demand over time, with significant growth potential through customer outsourcing of logistics services.

As part of its growth strategy, GXO intends to develop additional business in consumer and other verticals where it already has deep expertise, prominent customer relationships and a strong track record of successful performance. GXO also intends to expand into new verticals by leveraging its capacity and technological strengths, and by marketing the benefits of its proprietary platform for warehouse operations. GXO uses this technology to manage advanced automation, labour productivity, safety and the complex flow of goods within sophisticated logistics environments.

For the year ended 31 December 2021, GXO generated revenue of US$7.9 billion and net income attributable to common shareholders of US$153 million. Additional information on GXO’s latest financial results can be found at https://investors.gxo.com/.

Important Takeover Code notes

There is no certainty any offer will be made even if the pre-conditions are satisfied or waived.

This announcement has been made with the consent of GXO.

In accordance with Rule 2.6(a) of the Takeover Code, GXO is required, by not later than 5.00 p.m. on 20 March 2022, to either announce a firm intention to make an offer for Clipper in accordance with Rule 2.7 of the Takeover Code or announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Takeover Code applies. This deadline can be extended with the consent of the Panel in accordance with Rule 2.6(c) of the Takeover Code.

GXO reserves the right to make an offer for Clipper on less favourable terms than those set out in this announcement: (i) with the agreement or recommendation of the Clipper Board; or (ii) if a third party announces a firm intention to make an offer for Clipper which, at that date, is of a value less than the value implied by the Possible Offer. GXO reserves the right to introduce other forms of consideration and/or vary the mix or composition of consideration of any offer. GXO reserves the right to implement the transaction through or together with a subsidiary of GXO or a company which will become a subsidiary of GXO. GXO reserves the right to adjust the terms of the Possible Offer to take account of the value of any dividend or other distribution which is announced, declared, made or paid by Clipper after the date of this announcement.

📺 GXO: Logistics at Full Potential

GXO: Logistics at Full Potential (Extended)

📉 GXO Stock Technical Analysis

Gxo Stock

The long-term trend is positive and the short-term trend is neutral. GXO is currently trading in the middle of its 52-week range. This is in line with the S&P500 Index, which is also trading in the middle of its range. GXO is one of the lesser performing stocks in the Air Freight & Logistics industry. All 17 stocks in the same industry do better.

There is support at 78.24 from a horizontal line in the weekly time frame. There is also support at 73.73 from a horizontal line in the daily time frame.

There is a resistance zone ranging from 83.83 to 85.50. This zone is formed by a combination of multiple trend lines and important moving averages in multiple time frames. There is also resistance at 86.99 from a horizontal line in the daily time frame.

GXO has a poor technical rating and the quality of the setup is also not perfect at the moment. GXO stock has a Setup Rating of 4 out of 10. We see reduced volatility while prices have been consolidating in the most recent period. Click here to sign up for email alerts on when GXO stock consolidates and has a Setup Rating of 8 or higher.

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