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Planes, trains and automobiles: APAC transport M&A hits fast lane

Asia’s transportation dealmakers have the pedal to the metal in 2022, with deal value in the sector racing up to more than USD 48bn in the year to date (YTD), the highest value on Dealogic record and more than double the amount in the same period last year.

China, in particular, is helping drive M&A activity in APAC, almost tripling transport M&A value year-on-year to USD 24.9bn, and accounting for 51.8% of total deal value in the sector.

The USD 18.9bn acquisition of toll road operator and infrastructure constructor Jiangxi Provincial Communications Investment Group by Jiangxi State-Owned Capital Operation Holding Group continues Beijing’s market-oriented state-owned enterprise (SOE) reforms.

World in motion: transportation and logistics key to preserving supply chains

Chinese Premier Li Keqiang has repeated called for smoother transportation and logistics to stabilize the country’s economy and rebuff attempts by the US to re-shore part of the supply chain at home and in allied countries.

Indeed, national security concerns are starting to influence M&A strategy across the sector. TuSimple [NASDAQ:TSP], a self-driving truck firm based in California, but backed by China’s Sina Corp, is said to be exploring options for its Chinese operations.

China’s government is expected to gear up investment in transport-related infrastructure, not only at home, but in those nations that signed up to its ‘Belt and Road Initiative’, while like-minded partners such as Russia and Iran are also seeking to accelerate regional connectivity.

While China remains firmly at the center of APAC’s supply chain, other Asian countries are steering change in their own logistics strategies. The Australian government, for example, is to invest USD 120bn over the next 10 years to develop transport infrastructure across the country.

Supply-chain reaction: rise of e-commerce, technology reshaping industry

Factors fueling sector investment include: the take-off of e-commerce, digitalization, surging cross-border trade volumes, as well as increasing efficiency through technological upgrades.

One of China’s largest e-commerce companies, JD.com Inc. [NASDAQ:JD; HKG:9618], is planning to privatize Deppon Logistics [SHA:603056] in a transaction valued at USD 1.85bn.

Other prospective buyers openly looking to make tracks via sector consolidation in Asia’s fragmented transportation and logistics market include Hong Kong’s private equity (PE)-backed EV Cargo and Japan’s Mitsubishi Logistics [TYO:9301].

Most acquirors are strategic players; however, financial sponsors have also emerged as buyers in some of APAC’s highest-profile deals:

  • US-based investment giant KKR is seeking to take private Japan’s Hitachi Transport System [TYO:9086], a leading third-party logistics company, in a deal worth almost USD 6bn.
  • Qatar Investment Authority (QIA) and Singapore’s GIC have secured stakes in Sydney Airport [ASX:SYD] for USD 1.1bn.

Next stops?

Dealmakers have not been slow to hit the road to clinch more transactions in the coming months.

In March, Mergermarket exclusively reported that Philippine Airlines, the country’s flag carrier, is receptive to approaches from potential partners that could lead to a joint venture or commercial partnership as it explores diversifying into logistics.

Meanwhile, Philippines-based conglomerate Ayala Corporation [PSE:AC] says it plans to divest its stake in railway company Light Rail Manila Corp (LRMC).

China’s ride-hailing giant, Didi, is rumored to be in line for significant investment from FAW Group [SHE:000800], although FAW Group has denied this is the case.

Chinese truck fleet management start-up G7 Connect, which is backed by Tencent [HKG:0700], is expected to merge with Alibaba-funded rival E6 Technology to create a behemoth with access to 700,000 freight managers in the world’s largest road cargo market.

India’s Tata Sons is said to have held exploratory discussions with Singapore Airlines to merge the Indian carrier Vistara with Air India, although Singapore Airlines is reported to have asked for more time to decide on the proposal.

The direction of travel for APAC’s transportation sector looks to be one way in 2022.