William Fung, Li & Fung group managing director speaks at the company's results announcements in Hong Kong on Mar 25, 2009. (MIKE CLARKE / AFP)

Global shipping heavyweight AP Moller-Maersk is buying the contract logistics business of Hong Kong’s privately held Li & Fung Limited, the supply chain services provider.

Logistics and services are a growth engine by revenue for Maersk, which is aiming for organic growth of more than 10 percent. Demand was strong in the third quarter.

The enterprise value of the cash transaction for LF Logistics Holdings Limited, which has 223 warehouses in 14 Asian countries, is US$3.6 billion and this includes post-lease liabilities 

The enterprise value of the cash transaction for LF Logistics Holdings Limited, which has 223 warehouses in 14 Asian countries, is US$3.6 billion and this includes post-lease liabilities. It offers contract logistics solutions to customers in the Asia-Pacific region through In-Country Logistics and Global Freight Management.

Maersk announced that the acquisition will help expand its contract logistic capabilities and strengthen the integrated container logistics offering.
Li & Fung has a 78.3 percent interest in LF Logistics, while Singapore’s sovereign wealth fund Temasek Holdings has 21.7 percent.

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In a separate announcement, Li & Fung said it is entering into “a long-term strategic partnership” with Maersk, while the Danish company said logistics solutions will be developed with Li & Fung.

The deal is expected to close in 2022 once regulatory approval is obtained.

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Maersk Ocean & Logistics CEO Vincent Clerc said the acquisition will create an extensive warehousing network in Asia-Pacific markets. This is “underpinned by a best-in-class operational and technology platform which we can scale globally across our network.”

Li & Fung Group Executive Chairman Spencer Fung said in a statement that offloading LF Logistics will allow the company to “focus on our core trading and supply chain digitalization capabilities, which have seen a strong rebound back to pre-COVID-19 levels.”

In-Country Logistics is a supply chain partner for multinational brands within verticals such as fashion and lifestyle, retail and fast-moving consumer goods.

In the third quarter Maersk reported underlying profit of $5.44 billion on record revenue of $16.6billion. Maersk benefited from increasing freight rates and higher volumes. The freight business generated $5.4 billion revenue from higher freight rates, while logistics and services pulled in $710 million. Terminals and towage revenue was $229 million.