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C.H. Robinson Acquires The Space Cargo Group, Madrid-Based Freight Forwarder


C.H. Robinson (NASDAQ: CHRW) announced this morning its acquisition of The Space Cargo Group, which the company described as "a leading provider of international freight forwarding, customs brokerage, and other logistics services in Spain and Colombia." CHRW paid approximately $48 million in cash for the Spanish forwarder, which brought in $84 million in 2018 gross revenues.

The "accretive" purchase is expected to bolster C.H. Robinson's trans-Atlantic density; the move follows CHRW's $225 million acquisition of Australian forwarder APC Logistics in 2016, which helped consolidate trans-Pacific forwarding.

Space Cargo has seven offices in Spain and one office in Colombia, about 170 employees, and more than 2,500 active customers, according to a press release.

"We are excited to join C.H. Robinson, the best third-party logistics provider, and build on the business we have done together for more than 10 years," said Jordi Pellice, Chief Executive Officer of Space Cargo, in a statement. "We believe this partnership will position us to better serve our customers and promote continued growth by leveraging C.H. Robinson's worldwide network and diverse service offerings."

In the fourth quarter of 2018, C.H. Robinson shrank the headcount of its Forwarding business division by 0.4 percent year-over-year while growing the division's gross revenues by 14.5 percent year-over-year to $677.1 million ($2.48 billion for the entire year). That efficiency improvement prompted praise from analysts.

"We may be fully clear of lingering Milgram integration drag," wrote Stifel's equities analyst Bruce Chan in a January 30 note on C.H. Robinson, referring to the August 2017 acquisition of Canadian forwarder Milgram & Company and suggesting that the company was ready to buy another tuck-in.

At Stifel's Transportation and Logistics Conference in Miami Beach a few weeks ago, C.H. Robinson chief financial officer Andrew Clarke remarked on the company's mergers and acquisitions strategy.

"We've done pretty much an acquisition a year for several years," Clarke said, adding that the company has "doubled down on forwarding. In global forwarding, we're filling out geographical white space."

Gross margins expectations for the company's Forwarding division in 2019 depend on ocean freight and air cargo pricing and the mix of business that those modes account for in CHRW's book. Ocean freight is higher volume and lower margin, while air freight is lower volume but higher margin; for full-year 2018, the Forwarding division's gross margins were 20.7 percent, compared to North American Surface Transportation (truckload brokerage) margins of 16.2 percent.

According to an international freight forwarder who spoke to FreightWaves Friday morning (March 1), typical gross revenues per employee average between $500,000 and $1 million, compared to, for example, averages of $1 million to $2 million per employee in truckload brokerage. Freight forwarding has longer transaction times and involves the processing of compliance documentation and customs brokerage – labor-intensive activities that do not produce revenue.

Those figures make Space Cargo's numbers (170 employees, $84 million gross revenue) less than impressive, but the forwarder noted that "as far as Spanish forwarders go, that is probably above average."

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