Ceva Logistics has filed a preliminary prospectus with the US Securities and Exchange Commission and announced it will float its business on the New York stock exchange in a bid to raise up to $400m in share capital.
The company, owned by private equity firm Apollo Management, reported EBITDA (earnings before interest, tax, depreciation and amortisation) of €321m ($415m) in 2011, but analysts have noted its heavy debt burden, which stands at $3.08 billion, according to information in the filings.
Ceva has already attempted to address its debt situation, completing a debt-to-equity swap in February this year that eliminated about £860m ($1.39 billion) in debt. Dow Jones has reported that Ceva will use the money raised in the IPO to help pay down debt further. Ceva has not yet commented on its intentions for the IPO.
Details remain vague over the flotation of the company, there has not been a date set and the share price has not been established. It is not known whether Apollo, which bought the logistics division of TNT NV in 2006 for $1.9 billion and renamed it Ceva, will retain a significant holding in the company; it currently stands at around 91%.
In an interview earlier this year with Automotive Logistics Ceva's CEO, John Patullo noted that Apollo tended to be more of a long term investor, with an average ownership of around five years-about the same time it has owned Ceva. While he would not comment on Apollo's potential exit, but he predicted it would eventually be in the form of an IPO (read more here).
In the interview, Patullo also cited the debt-to-equity swap as evidence that Ceva and Apollo were taking steps to deal with its high debt levels, which he hoped would settle doubts that current and potential clients might have regarding the future of the company.
Ceva is the second largest non-asset based provider globally. According to estimates by the consultancy Transport Intelligence, it is the largest third party provider of logistics services to the automotive industry, representing around 25% of its €6.9 billion revenue in 2011.
Automotive shines amid weaker results
Ceva reported its first quarter results this week, which saw a small increase in revenue but a drop in EBITDA. According to the company, however, automotive business continues to perform very strongly.
According to Ceva, gains in its Contract Logistics were driven by "an excellent performance from the automotive sector" as well as strong year-on-year growth in the industrial sector. Group adjusted EBITDA stood at €66m, 7% lower than last year, partly affected by a "disappointing" airfreight performance, though there were new business wins of €504m, which the company said exceeded targets.
Results published this week show a 2% revenue increase to €1,712m in the quarter for the group, with contract logistics revenues up 3% to just below €950m, helped strongly by automotive business, particularly in Asia and North America. Ocean freight also performed well but the company reported "flat" revenues in the freight management sector at €763m.
"Even in these more difficult markets, Ceva continues to make progress," said Pattullo in a statement. "Our ocean business performed well and we continued to make solid gains in contract logistics driven by excellent performance from the automotive and industrial sectors. The airfreight market continues to be challenging, with Ceva's performance mirroring that of many of our competitors."
The company has made a number of automotive contract wins and renewals over the quarter including a two-year extension with Renault in Brazil for the receipt, storage and consolidation of parts for export to France, Argentina, Mexico, Romania, Colombia and South America (read more here).
The first quarter also saw Ceva sign a three-year agreement with Hankook Tire Italy to manage the storage, distribution and reverse logistics for the customer's tyres at its hub in Somaglia, near Lodi (read more here).
*In other news the company recently announced that it has officially opened its Control Tower in Alcobendas, near Madrid, Spain, which offers enhanced control functions to cater for all logistics services. The new tower is structured in a similar way to the Milan Control Tower, which was launched in 2010.
The Control Tower will allow the control of fundamental logistics operations from a single central point, at both national and international levels. In this way CEVA will strengthen the levels of service offered to customers, at the same time ensuring further cost optimisation.