Ascending a Logistics Summit
Opportunity knocks for former P&O Nedlloyd employees, merge companies into logistics group.
BY CHRIS DUPIN
Reprinted with permission of American Shipper.
A group of P&O Nedlloyd executives have formed a new independent logistics company in the wake of their former employer’s 2005 mega-merger with Maersk. Their company, Summit Global Logistics Inc., engineered the combination of several companies last year — FMI International, TUG Logistics Group, SeaMaster Logistics, and AmeRussia Ltd.
About half the senior management team and directors of Summit are former P&O Nedlloyd employees, while most of the others are officers from the merged companies.
Summit anticipates annual revenue of more than $200 million and controlling the movement of about 75,000 TEUs of cargo from the get-go. That would rank the new company in the top 25 to 30 U.S. 3PLs, said Richard Armstrong, a logistics industry analyst based in Stoughton, Wis.
“The strategy is to build an end-to-end logistics provider built around the import operations, particularly from China to the U.S.,” said Robert A. Agresti, chairman, president and chief executive officer of Summit. He had been executive vice president for North American Trade at P&O Nedlloyd.
“The idea is to marry up the international supply chain and domestic supply chain and make it one cohesive end-to-end operation,” he added.
The company plans to concentrate on providing international logistic services, primarily to small and medium-size shippers, companies that don’t have the in-house capabilities to do it as well as others,” Agresti said.
Summit does not plan to target the very largest shippers like Wal-Mart or Target, but feels it will be able to attract substantial mid-market companies, shippers moving up to several thousand containers per year.
“Maersk was very good to all the people in the merger process, but there are only so many seats on the bus,” Agresti said. “The people who are part of the team here came to our own personal conclusions that working for an even bigger company is not what we wanted to do. Plus we liked the idea of going out and being more entrepreneurial.
“I think it was an opportunity to take a step back and consider what is out there,” he added. “Collectively we made a decision that we would give it a shot and see where we would go. Like with a lot of things, luck, timing and a lot of hard work came together and you see the birth of a new company.”
Summit went public in November through a “reverse merger” by acquiring a shell company that was no longer active and changing its name to Summit.
FMI Agresti said part of the inspiration for starting the company came from P&O Logistics’ 2002 acquisition of Gilbert Cos., a company that specialized in expedited cargo shipments, consolidation, less-than-truckload shipments, warehousing and store delivery in the United States.
“There are a lot of parallel’s between FMI and Gilbert,” he said, “But FMI is more in the international space and Gilbert was organized a lot more around domestic shipping.”
Specializing in trucking and logistics for apparel and footwear, FMI has 700 employees and about 1.9 million square feet of space at six locations, where it performs services such as cross-dock logistics and public warehousing. It had revenues of about $118 million in 2005.
In business for 25 years, FMI has a large air freight facility at JFK International Airport in New York; an automated footwear distribution center in Mira Loma, Calif.; and facilities in New Jersey; Miami; and Charleston, S.C. One of its specialties is moving garments on hangers. Since 2003, it had been owned by the private equity firm KRG Capital in Denver.
“This has always been a very successful market for us — capturing freight at gateway ports, high-value import commodities that we can offer a high level of service,” said Thomas Wyville, director of sales and marketing for FMI. “We grew out of an international freight forwarder and we understand the international side of business.
“We are not outsourcing to a third or fourth party,” he said. “Sometimes it turns out that when you really drill down into some of these opportunities, you find out some of the big 3PLs are 5PLs — they are outsourcing to someone who is outsourcing.”
TUG.
Agresti said the eventual makeup of Summit was a gradual process, but came together faster than it might have under normal circumstances because you “had a whole team of people who were displaced because of an acquisition by a larger company.
“It was not obvious when we left where we were going to wind up to achieve our vision,” he said.
“We went out and met a lot of people we knew in the business. TUG was one of them, but we met with others. We said ‘this is what we are trying to do and are you guys interested?’ It took a while to figure out who would be interested in doing something like this,” he said.
From their days at P&O Nedlloyd, Summit’s leadership knew Robert Lee, CEO, and Robert Wu, CFO, of TUG, a 12-year-old non-vessel-operating common carrier.
TUG has six locations in the United States and extensive operations in China. With 50,000 square feet of space in California and 155 employees it had annual revenues of about $76 million in 2005.
“TUG was very interested in doing this, agreed with our vision and saw the opportunity,” he said. “Then when we were looking to obtain the money to do these investments, our investment banker, Rodman & Renshaw, came up with the idea through the private equity firm KRG Capital that FMI was a good fit,” he said. FMI executives, including Gregory M. Desaye, chairman, and Robert J. O’Neill, CEO, have agreed to remain with the company.
Summit has also formed a subsidiary called SeaMaster, which Agresti said would act as Summit’s “headquarters arm in Asia.” Based in Hong Kong it will be headed up by Peter Stone, an ex-P&O Nedlloyd executive.
“Having people on the ground, in Hong Kong and China to support that business who we know is key to success,” Agresti said.
The company also acquired AmerRussia, a Russian freight forwarder that it plans to use as a base from which to develop business in Europe and the eastern Mediterranean and Middle East, including the fast growing markets in areas like Turkey. Rick Shannon, president, will remain with the company. AmerRussia had sales of about $1.8 million in 2005.
“A lot of customers that we are going to be dealing with from Asia are also sourcing and sending quite a bit of garments out of Turkey and other Mediterranean countries,” said Samantha Scott, vice president of sales integration.
While apparel and footwear are strengths of FMI, Summit plans to go after other vertical markets as well. For example TUG is involved in the toy market and electronic goods.
Providing customers with visibility into their supply chain is important, and Agresti said the company would customize information for them. But he said the company plans to use LOG-NET Inc. software for this purpose, which both FMI and P&O Nedlloyd used extensively.
Summit has several big investors behind it.
KRG continues to own a significant interest in the company. Fortress Investment Group has a $55 million loan and has extended a $10 million line of credit. Angelo, Gordon & Co. is the lead investor for a group of investors who hold $65 million in convertible notes.
Being a public company gives Summit more visibility, and will help the company “retain and attract the best people in the industry,” Agresti said. “Ownership is so important, having a piece of the company they can call theirs. Doing it in other ways would not be as efficient to get people really excited about being part of this.”
Wyville believes Summit, as a midsized company, has the ability to be “more nimble, flexible and cater to its customer’s needs” than the very largest 3PLs. The fact that it is independent of a steamship line gives it maximum flexibility.
“It’s a pretty big field out there — we are going to be competing with the shipping lines, the big logistics providers that are out there, and regional players. Competition is pretty robust,” Agresti said.
“At the end of the day, a lot of companies are out there who do well and can do a lot of the same services. But it boils down to customers who want to have somebody they can trust, somebody they like and somebody that is offering superior service for what they are willing to pay for it,” he said.
All rights are reserved and no part of this file may be reproduced or redistributed in any form or by any means electronic or mechanical, including photocopying, recording, or by any information storage or retrieval system, without written permission from the Publisher.
Notice is given that a fee of US$2500.00 will be charged for each incidence of content being reproduced or redistributed without prior permission in writing from the publisher.