Lineage Logistics Expands Global Cold-Storage Space with $900 Million Acquisition
November 18 2019 - 2:58PM
Dow Jones News
By Jennifer Smith
Lineage Logistics LLC, the largest refrigerated-storage company
in the world by space, is expanding in the Asia-Pacific region with
a deal to buy upstart Emergent Cold from hedge fund Elliott
Management Corp.
Lineage, whose customers include Walmart Inc., Tyson Foods Inc.,
General Mills Inc. and Sysco Corp., is paying more than $900
million for Emergent, in a deal being announced this week,
according to a person familiar with the sale. The transaction would
increase Lineage's global footprint by about 8%, to more than 1.7
billion cubic feet of capacity.
The acquisition, expected to close in 2020, comes as shifting
consumer tastes toward fresh foods and the rapid growth in online
grocery sales fuel more demand for refrigerated storage.
Investors are pushing more money into a market where low margins
and the high costs of warehouse development have long deterred
investment. The biggest companies in the fragmented sector are
racing to expand domestically and overseas as demand for cold
storage space outpaces supply.
Lineage, which is controlled by San Francisco-based Bay Grove
Capital, has grown rapidly in recent years through a series of
increasingly large acquisitions. This year, it bought U.S. rival
Preferred Freezer Services LLC for more than $1 billion.
The Novi, Mich., company has made nearly 40 acquisitions since
its 2008 founding, and moved into the international market in 2017
by buying Partner Logistics, a large European
temperature-controlled storage provider with automation
expertise.
This year, Americold Realty Trust -- No. 2 in the sector,
according to the International Association of Refrigerated
Warehouses -- spent $1.24 billion to acquire privately held
Cloverleaf Cold Storage, officially known as Chiller Holdco LLC,
which put its storage capacity at more than 1 billion cubic feet.
Americold's share price has gained more than 39% over the past 12
months.
Lineage Chief Executive Greg Lehmkuhl said the bigger global
network gives the provider an edge with food producers,
manufacturers and retail customers looking to manage their supply
chains across several regions.
"We can come in and say, 'Where should your warehouses be, where
are your manufacturing plants now, how are you distributing to your
customers?'" he said. "We can use our network and experience to
optimize their food supply chain, and help them strategically
position inventory."
Mr. Lehmkuhl said the company may consider an initial public
stock offering as it seeks more backing for expansion efforts.
"That's always an option for us in the future and we are working on
IPO readiness in case," he said.
Emergent Cold was founded in 2017 and has since become the
ninth-largest global cold-storage provider by space, according to
IARW, with locations in Australia, New Zealand, Sri Lanka and
Vietnam. Its chief executive, Neal Rider, is a former Americold
executive.
Elliott Capital will maintain an equity stake in the combined
entity, a person close to the deal said.
Buying Emergent adds to Lineage's regional properties in China
and Vietnam and gives the company more capacity in a region where
growing consumer buying power is fueling more demand for fresh food
and temperature-controlled logistics.
The deal also brings Lineage a distribution center in the
Dallas-Fort Worth area and port facilities in New Orleans, Houston
and Charleston, S.C.
Write to Jennifer Smith at jennifer.smith@wsj.com
(END) Dow Jones Newswires
November 18, 2019 14:43 ET (19:43 GMT)
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