Menlo Worldwide is adopting an aggressive strategy of merger and acquisitions and strategic expansions in key Asia-Pacific markets to reinforce its position in the region as a leading 3PL (third party logistics) player. The company, which is the global logistics subsidiary of Con-way Inc., has earmarked more than US$6.5 million for facility expansions and upgrades in Singapore, Thailand and Malaysia.
In June, Menlo Worldwide acquired Singapore’s Cougar Express Logistics for US$34 million and also acquired Shanghai-based Chic Holdings for US$60 million in September. Both acquisitions have boosted Menlo Worldwide’s operating sites in the region from 13 to 155 and its warehouse capacity from 300,000 sq.ft to 3.5 million sq. ft.
“As China is becoming the world’s factory, several companies are facing high manufacturing costs which are getting complex, and they also face lots of challenges from both inside and outside the country,” James Hsu, Managing Director, Menlo Worldwide, Asia Pacific, says.
He says customers nowadays expect better services and China is moving away from the low end production and OEM businesses. “Many companies, which are manufacturing, have their own brands and they want to market them globally. They face several challenges such as how to optimize (their processes), and we give them this support.”
Menlo’s customers, comprising mostly Fortune 500 companies in North America and in the Southeast Asian region, want assistance with logistics services and transportation management services in the China market.
“Through talking with foreign companies, we found they had great difficulty with dealing with Chinese companies and as a result we talked to several Chinese players and decided that Chic Holdings was a profitable investment (to help them),” Hsu says.
Chic Holdings has a full-service portfolio and network with 130 operating sites in 78 cities, providing superior coverage of China’s highly industrialized eastern sectors as well as the mainland’s interior provinces.
It is one of China’s fastest-growing third-party logistics firms, and Chic Logistics produced revenues of US$55.2 million in 2006, a 40 percent increase over 2005.
“The owner of Chic Holdings, which has been working with top customers in China for many years, was looking for ways to meet transport and logistics challenges outside Mainland China while we were looking for a partner in the Mainland. We realized that there were many complementary areas between our two companies and decided to carry out the acquisition.”
“We completed the financial transaction in October,” Hsu says. “Now, both sides are looking at how to put the integration plans to work.”
“We are looking at how to ensure customers from both companies are aware of what we are doing and how the integration will affect them.”
As many of Menlo’s customers from overseas have entered the China market after the country joined the World Trade Organisation (WTO) while Chic’s customers are based in Mainland China and wish to expand their operations overseas, this acquisition has little duplication.
“We are actually developing our business but we see few changes. Chic has a strong management team and they are efficient operationally. Although we own the title Chic Logistics, however, we are very sensitive to customers on both sides. During the integration plan, we have no plan to change the name.”
“Once the integration comes to an end, we will go to the customers. Then we will decide on the branding, but we will be sensitive to our customers’ wishes and do not wish to create any confusion” Hsu says.
“In our estimation, the first 100 days of the acquisition are the most important to ensure both sides carry out complimentary reporting and to ensure all activities are carried out in accordance to the laws in China.”
Combined, Menlo and Chic will comprise more than 1,500 employees in China operating from 139 sites in 79 cities, with nearly 180,000 square metres of warehouse space under management.
Menlo’s China operations will be based at Chic Logistics’ headquarters in Shanghai headed by Johnson Shen, who is CEO of Chic Logistics. – Wong Joon San