Following American logistics and supply company Supreme Group's purchase of more than 90 percent of the shares in Norwegian EMS Seven Seas, the potential for a consolidation of the civilian part of the ship supply market is back in play.
The Americans' somewhat surprising offer and deal with the five major shareholders behind EMS Seven Seas has been estimated by several market observers to be based on Supreme Group's strength in the military leg of the business. EMS Seven Seas and Supreme Group have worked together as key suppliers of field rations to the US forces in Afghanistan, and market sources beleive that the main purpose for the Americans has been to get their hands on the Dubai office, which has also been the most lucrative part of EMS Seven Seas.
There is no information yet if Supreme Group plans to just integrate the military part of EMS Seven Seas and get rid of the some 20 civilian offices located in ports around the world. But should this move lead to an offer on the commercial business, major Danish competitor Wrist Ship Supply would not reject a meeting, CEO Robert Kledal tells ShippingWatch.
Consolidating all the time
"We're a company that's constantly consolidating and we're continuously looking at potential acquisitions. So, if we get an offer we're going to look at it, but of course it depends on the price and a subsequent due diligence. Though there's nothing to indicate that this business should be any different from so many of the other companies we're looking at. But it goes without saying that such an initiative must come from Supreme," says Kledal.
As it looks now, Supreme Group seems intent on strengthening its business in an effort to become a global leader, thus pushing Wrist Ship Supply aside as the world's biggest company in delivering supplies to ships and the offshore industry.
"We are prepared to make investments to ensure EMS Seven Seas becomes the global leader in commercial ship supply within three years, and we look forward to working closely with their teams around the world to make this happen, merging our organizations to leverage operational synergies to their fullest potential," says Supreme Group CEO Theo Reichert.
Well-consolidated competitor
And Rober Kledal does point out here, at first, that the acquisition brings a new and well-financed competitor onto the field.
"We respect Supreme and what they've achieved. Something needed to happen in this business, so if they hadn't acquired EMS Seven Seas there would have been some other solution. This doesn't mean anything in terms of our investment plans, which will continue as planned. We want to be biggest from 2017," he says.
However, customers in shipping and offshore should not expect lower prices, as the market is too fragmented with several thousand local players operating in ports around the world.
"I don't see this specific transaction resulting in additional price pressure in an already fragmented low-margin industry," as Robert Kledal says.
EMS Seven Seas and Wrist Ship Supply both have a share of around six or seven percent of the global market.
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