After Schenker was acquired by DSV this year, it was initially unclear what would happen to those contracts. Lund wanted to continue fulfilling the contractual obligations and even talked about “reconsidering Russia policy.” This drew fierce criticism from shareholders.

It now appears that DSV will cease transport operations on Russian rail, but only after the currently active contracts expire. According to Lund, the majority of those contracts will expire this year, and “one or two contracts” are scheduled to expire in 2026. After that, the trains carrying out work for DSV in Russia must be completely finished.

This article was originally published by our sister publication NT.nl.

DB is struggling financially as the 333 million euros in operative losses for 2024 show. The cargo sector is doing even worse, with losses for 357 million euros. Without its main bread maker, the group will need to find alternative solutions to become profitable, especially since the EU dictated that DB Cargo needs to become profitable by 2026. To try and achieve this, the DB’s rail freight subsidiary is undergoing a major restructuring.

DSV takes over the world

DSV will almost double in size with the new acquisition. Schenker employs over 70,000 people and the combined new workforce will be “close to 160,000 employees”. Schenker should also bring in some money for the Danish shipping company, as it was for years the most profitable branch of DB. DSV expects a combined revenue of over 40 billion euros. “Based on preliminary estimates, annual synergies are estimated in the level of DKK 9 billion (1,2 billion euros) at (the) end of 2028”, the company said.

The sale of Schenker

DB’s logistics arm was put up for sale in December 2023 after a year of internal discussions on how to reduce the group’s debt. Not everyone in Germany welcomed the decision to sell Shenker. Trade union EVG, which has two members in DB’s Supervisory Board, voted against the sale, claiming that the relationship between Shenker and DB Cargo should have been strengthened to create a door-to-door logistics network.

During the first phase of the sale process, the parties interested in acquiring Schenker were DSV, MSC, Maersk, DHL, Bahri, a consortium of investment funds – CVC Capital Partners, Carlyle Group and the Abu Dhabi Investment Authority. Only DSV and the consortium ended up submitting a final offer. DSV was selected as the buyer in September 2024. The Danish company will get the money to pay for the acquisition through the sale of bonds and shares as well as bank debt.

The sale of DB Schenker

The official decision to sell came in December 2023, and DSV was selected as the buyer about a month ago, beating an offer of a consortium led by CVC Capital Partners. Selling DB Schenker, the logistics arm of the German state-owned railway holding Deutsche Bahn (DB) was a necessary measure for the mother company to partly cover its outstanding debts, set at 34 billion euros.

However, not everyone in Germany agrees on how the money from the DB Schenker sale should be used. Trade union EVG is pushing to deploy the funds to cover DB’s debts, while rail freight association Die Güterbahnen claims that the money should be used to upgrade the German rail infrastructure.

It now remains to be seen what DSV’s plans will be and what the impact of this sale, both in Germany and worldwide, will be. Recently, DB defended the choice of DSV as the buyer after concerns moved by the other final bidder, a consortium led by CVC Capital Partners, regarding the transparency of the decision. “The sale is expected to be completed in the course of 2025 after all regulatory approvals have been received”, DB said in a statement.

‘It was a mistake’ says EVG

“We believe the decision to sell Schenker was a serious strategic mistake. In order to generate short-term revenue, long-term income is to be foregone”, said Martin Burkert, Chairman of EVG and member of DB’s Supervisory Board. The union is now asking for the profit form the sale to be used to repair DB’s debt and is highlighting “a threat of massive job cuts” if negotiated guarantees are not made more specific and for longer than the current two years.

DSV submitted the best offer for DB Schenker, putting it ahead of equity firm CVC, according to DB. After the initial deadline, DSV even raised the stakes, but that had no impact on the sale decision.

Legal obligation

DB says that it is obliged to sell Schenker to the highest bidder. “DB conducted a tendering process that was non-discriminatory for all participants in accordance with EU law. The evaluation of the binding offers resulted in a clear ranking. This is why DB was only allowed to sell its logistics subsidiary DB Schenker to DSV. A sale to CVC, on the other hand, would have been illegal on the basis of the submitted offer.”

The German rail operator also dismisses allegations of favouring DSV during the sale process. “In no way and at no time was the unsuccessful bidder CVC disadvantaged. After evaluation, CVC’s offer of August 22, 2024 was far behind DSV’s offer in terms of both price and contractual risk distribution. This also applies to the re-participation option additionally offered by CVC”, DB explains. It says that CVC’s offers, including later amended ones, were “always inferior to the successful offer from DSV.”

CVC protest

CVC protested the decision to sell Schenker to DSV, maintaining that its offer was better than DSV’s. However, DB says that CVC’s analysis of the bids is faulty: “DB has submitted the report submitted by the unsuccessful bidder CVC on the afternoon of September 26, 2024 to its legal advisors for review. After a first review, it is already obvious that the report incorrectly mixes EU state aid and procurement law requirements with economic facts and thus comes to incorrect conclusions.”

“If Deutsche Bahn was of the view that there were any residual uncertainties as to how the two offers compare, we would be prepared to discuss an increase of the equity value of our offer to fully remove any such concerns”, CVC says in the letter, which was obtained by Bloomberg. However, it now seems that DB will keep its course and DB Schenker will end up in DSV’s hands.

DB Schenker sale still needs confirmation

Earlier this month, DSV announced that it had won the race for the DB Schenker acquisition. The Danish logistics company is putting 14 billion euros on the table for the purchase, which would propel it forward to become the largest freight forwarding company globally.

The purchase still needs to be confirmed by a supervisory board, which means that there is technically still a possibility that the purchase can go off the rails. It seems that CVC is taking its chance to snatch DB Schenker away from DSV at the last moment.

“The acquisition of Schenker is a transformative transaction for DSV, creating a world-leading player within the global transport and logistics industry,” the Danish company commented in a statement.

It continued explaining that  “with this acquisition, Germany will be a key market for DSV with a substantial impact on the future organisation. Various central functions will stay in Germany, including at the Schenker location in Essen. DSV expects to grow in Germany and plans EUR 1 billion investments in Germany in the next 3-5 years.”

More steps remain

The Danish company provided some insights into the remaining processes until the deal is fully sealed: “The deal is conditional on approvals by the Supervisory Board of Deutsche Bahn and by the German Federal Ministry for Digital and Transport, which are expected in the coming weeks.

In addition, the acquisition is conditional on obtaining customary regulatory clearances, which are expected to be secured in Q2 2025. DSV expects to finance the transaction through a combination of equity financing of around EUR 4-5 billion and debt financing.”

Last-minute battle for DB Schenker

In the days leading up to DSV coming out on top, only two contenders for the purchase remained. The Danes are leaving equity firm CVC behind them after both Maersk and Saudi shipping company Bahri dropped out earlier in the summer.

In the lead-up to the finalisation of the deal, both DSV and CVC sweetened their bids in an attempt to win over DB. The Danish logistics company indicated that it wants to invest around 1 billion euros in DB Schenker in the years following the takeover to boost profitability.

CVC, for its part, offered an additional payment of at least 1 billion euros to Deutsche Bahn in case of a future initial public offering (IPO) exit. That offer would have stood if the German government went along with one of two variants of CVC’s bid, in which the state would remain a minority stakeholder in DB Schenker, Reuters wrote.

Brokerage Sydbank projects that DSV will now become the largest freight forwarder in the world in terms of both volume and revenue writes Reuters.

This story has been updated. Find out more by clicking on this link. 

Only CVC and DSV remained as contenders for the acquisition of DB Schenker, after Maersk and Saudi shipping company Bahri dropped out of the race earlier this summer. Now, it is Danish DSV that is reportedly coming out on top. It would propel the company forwards to become the largest freight forwarder in the world.

The finalisation of the race was reported by both Reuters and Bloomberg, citing sources in the government and DB. The supervisory board of DB will convene in an extraordinary meeting in the coming days to approve the deal, writes Reuters.

Labour union favoured CVC

Despite DSV’s reported victory, German publication Der Spiegel wrote that labour union Ver.di was campaigning heavily in favour of CVC’s bid. The union expects DSV to heavily cut jobs after the takeover, as it typically sheds about 45 per cent of jobs in the 18 months post-deal.

On the contrary, business consultant and analyst Bernstein described DSV as“the logical buyer” of DB Schenker earlier this year, with it having “the highest synergy potential and the lowest execution risk and that the company would be “worth the most to [DSV], and they should be able to pay the most for it”.

Last-minute battle for DB Schenker

In the lead-up to the finalisation of the deal, both DSV and CVC sweetened their bids in an attempt to win over DB. The Danish logistics company indicated that it wants to invest around 1 billion euros in DB Schenker in the years following the takeover to boost profitability.

CVC, for its part, offered an additional payment of at least 1 billion euros to Deutsche Bahn in case of a future initial public offering (IPO) exit. That offer would have stood if the German government went along with one of two variants of CVC’s bid, in which the state would remain a minority stakeholder in DB Schenker, Reuters wrote.

Two offers

Reportedly, CVC made two offers for the logistics company. The alternative is a scenario in which CVC acquires 100 per cent of DB Schenker, and it offers around 14 billion euros for it. In the scenario where the German state remains a minority stakeholder, CVC is willing to put 16 billion euros on the table.

The private equity firm is competing with DSV for the acquisition of DB Schenker, and the latter was reported by Reuters to be slightly ahead in the race. Nevertheless, DSV also sweetened its bid by saying that it wants to invest around 1 billion euros in DB Schenker within three to five years to make the business more profitable.

DB Schenker employs over 76,000 staff in more than 130 countries. “The threat of job losses in the event of a takeover of DSV is immense,” the document reads, a copy of which was also sent to Deutsche Bahn’s supervisory board.

“As CVC does not operate a logistics business, no such imminent job losses are to be expected here,” the document added. In fact, CVC already has a strong logistics presence, owning Denmark’s fast-growing Scan Global Logistics – a direct competitor of DB Schenker. The question here is whether CVC plans to forge a merger between SGL and Schenker or perhaps sell off the former if its offer wins.

Earlier this year, business consultant and analyst Bernstein described DSV as“the logical buyer” of DB Schenker, having “the highest synergy potential and the lowest execution risk and that the company would be “worth the most to [DSV], and they should be able to pay the most for it”. However, it underlined the importance of the ‘jobs factor’ and that German politicians may resist a sale to DSV as it “typically sheds 45 per cent of the increase in headcount in the 18 months post-deal.”

DSV smoothens out its offer

Meanwhile, according to Reuters, DSV has sweetened its bid by indicating that it wants to invest around 1 billion euros in DB Schenker within three to five years to make the business more profitable, quoting sources close to the negotiations. In addition, no individual parts of DB Schenker would be sold after an acquisition, they said.

DSV and DB Schenker would employ more people in Germany in the medium term than currently. DSV has assured that employment guarantees would be in place for two years after the expected completion of the sale in 2025, the sources added. Responding to the media report, a spokesperson for DSV said: “We don’t comment on rumours in the market or M&A in general.”