"Although there is a strong case for TDG and Salvesen to merge, the combined company would still be mainly UK-focused, with relatively limited basis for growth in mainland Europe," says Datamonitor logistics analyst, Tom Mills. "This could prove a drawback in a sector where geographical coverage is needed to serve multinational clients and regional supply chains."
Salvesen and TDG are respectively the third and fourth largest logistics companies in the UK. Although a merger would merely create a larger third-placed player behind Exel and Wincanton, a merged company would benefit from increased scale and cost savings.
The Salvesen family controls 30% of Salvesen's stock and has fended off several takeover bids. However, they are thought to be unlikely to oppose a merger. The company's other shareholders would doubtless be keen for a deal after repeated profit warnings that have weakened Salvesen's market value. Most observers agree the deal would make sense in a market where size is an increasingly important factor in competing for the most valuable customers.
TDG's move may encourage other European players to consider a rival offer for Salvesen. Deutsche Post World Net, for instance, has set the pace for consolidation in the European logistics sector with a series of major acquisitions. But it still lacks a significant presence in the large UK market. It is thought, however, that the Salvesen family may be more receptive to a merger than a takeover.