M&A Announcement

Apr 1, 2019

Ladies and gentlemen, welcome to the DSD Conference Call. For the 1st part of this call, all participants will be in a listen only mode and afterwards there will be a question and answer session. Good morning, and welcome everybody to the, conference call where Jens Lund and myself, will go through, the recently announced, acquisition of Panalpina, where we, this morning, have announced the deal we will put the 2 companies together. We have made a small presentation for you and I will point your attention to page number 2. We have a little bit more thorough disclaimer than normal. I don't expect you guys, want me to read it up read it all, but please read it, and take that into consideration. So the agenda on page number 3 We'll try to do it as smooth as possible, so we allow for questions afterwards. But, we'll talk a little bit about the strategic rationale of the combination. Transaction overview a little bit about Panalpina, as, at a glance and then, what the combination will look like and next steps and, and, and Q And A. We are this morning extremely excited. We are happy. We are proud. We're very humble that we have men's to, strike a deal with the, the board of, of Panalpina. It's a high quality company with a unique, customers and employees and skills, strong company culture that we have been looking at for many, many years, and it is a very good day, here at the head office in Denmark today. And both Jens Lund and myself, we also look very much forward to meeting all the employees of, Panalpina when we travel to their head office in Parcel a little bit later, today. So on page number 4, we have tried to put 4, 5 points down on some of the strategic rationales behind the deal. We are creating now one of the world's largest transport and logistics companies. And as we have talked about many times, size matters in our, fragmented industry, and we truly believe that to be the case here also. It is the best of 2 worlds we are 2 very strong companies, individually, but together, we will be an even stronger company. There's no doubt about that. We have analyzed Panalpina, and we have seen that they have some unique customer relationships and also some vertical expertise that we probably don't have, in DSV. There will be a lot of cross selling opportunities and of course, higher growth potential also by creating a new global top 4 player in freight forwarding, and we will strengthen significantly our position within, Air And Sea. There'll be a lot of commercial synergies from stronger network and the services that we will offer to our customers. Of course, there will be some cost structure optimization. We will consolidate, operations, administrations, warehouses and logistics facilities, and we believe that the company can continue, as we have seen in DSV, to exercise some sort of cost leadership which will be crucial to stay competitive and to grow the market share in our freight forwarding industry. We will also continue together to consolidate the infrastructure, and we will leverage on the lessons, that we learn from, what we consider successful integration of, of UGI. Of course, this is, also a very, very important to bear in mind. We have, what we consider a very, very strong and very, very attractive financial business case that always underpins all M and A that we do in DSV. We target for the transaction to be EPS accretive, diluted and adjusted in year 2 after the settlement. And we have a clear aspiration for the margins, the operating margins of the combined entity towards, the margins of DSV's existing level. And maybe, Jens, you will go through some of the, the transaction, overview now on page number 5. Sure. Thank you very much. And, if we start with the purchase price, it's a little bit unconventional because we offer shares. We normally pay in cash, but we have offered 2.375 DSV share per panel Pina share. And this gives us an enterprise value of approximately CHF 4,600,000,000. Here, we have not taken IFRS 16 into account because I think all the comparable transaction multiples that we all sit with are pre IFRS 16. So we still use them in our communication. So we certainly pay a high EBITDA model multiple of 28 times. And I think that should be attractive to all the Panalpina shareholders. So we're talking about an implied offer price of almost CHF 196 per share. But of course, it depends on the exchange ratio, as well as the DSV share price. So the value will be sort of moving a little bit as we go along. So, we will, issue approximately 56,000,000 new shares. And that's equivalent to 23% of the DSV share capital, today. So, on the offer, we can say that we have received support from the 3 major shareholders in Panalpina, which we're very grateful for. And it means that, 69.9 percent, I think in daily speak, we would say 70% of the shareholder they, support us on the transaction. And, actually, we already have the capital in place that is required or to secure the transaction. We would want more, acceptance from the shareholders because it would make the integration even more smooth. So that's what we are targeting for. That we get the remaining shareholders on board. Then, when we print new shares, we have to, issue our prospectors, in the EU, in Denmark and also our prospectors in the U. S. Taking care of the U. S. Shareholders. Due to this and also, of course, for the compliance filings we need to make, when it comes to competition law, etcetera, we expect that it will take 6 months before we will be able to close the transaction. It's a lot of hard work, but the way we've evaluated is that there should be no road blockers in this. So, that's a little bit on the prospectors and the settlement. Then we've made some other agreements also to respect the Panalpina brand, the Panalpina team, we've decided that the listed company should be rebranded to, DSV Panalpina, And that will be done within a short period in time after closing. We will set up an integration committee, taking care that we get a fair integration of the two entities, so that we evaluate our staff on a transparent basis, for the future set up where we have overlaps, we will see which functions can we keep in the Panalpina headquarter? We've already made some concessions in relation to the local operation. But, there's also an evaluation that is going to take place about the other functions that are in the headquarter. Then we have also agreed that due to the fact that D. Anne Schooner, Stifton will become the largest shareholder in DSV. They will have a representative on the DSV board And we look forward to that. And, on the dividend policy, we have also accepted to raise our payout ratio from 10% till 15%. Basically, our capital allocation model and our capital structure thinking should remain the same. And I guess some of you guys would say that we've taken in too much equity bankrolling this transaction. We will come back to you, shortly, on how we realign this so that we continue to have the capital allocation and the capital structure policy that we have run for years in DSV and which we think that our shareholders have appreciated a lot So we will, make sure that we realign this and, then, we should be good, to go on that point. And I think now we move to the next slide. I can talk a little bit about that on page number 6. So I guess most of you guys to have a fairly good knowledge about Panalpina, CHF 6,000,000,000 in revenue. They are Panalpina is present in more than, 70 countries. So I think a combination, we will be in about 90 countries, of course, extremely strong capabilities in both air freight and sea freight. With airfreight, just crossing 1,000,000 tons in 2018. If you do some modeling the, on the yield management, you have to take into account that approximately 20% of the volume is perishables, which carries a somewhat lower. GP per unit and 5% is controlled directly by customers. Also, the combination will create strength, in contract logistics and energy solutions, where we will add approximately 10% to our, solutions, footprint today. Of course, we're extremely excited about the strong custom relationships, that that Panalpina have. They are a well known brand in the industry amongst the most well known companies and the highest quality companies, blue chip companies in the world. And we, are excited about the opportunity to come out and and also, the DSV services to these customers. Panalpina have a special competence and know how in air freight, with some freighter systems. We are, we have thoroughly analyze them in the process and we are excited also to, to see how that will, will work in a combined way. On sea freight, we are more or less the same size, Panalpina and DSV. We handle approximately 1,500,000 TEUs. What you also here have to bear in mind that is approximately, 30 5% of that volume is related to freight management services, which is non NVOCC that could also carry a slightly lower GP per unit. But all in all, it's, the combination is extremely good On page number 7, you can see we are not we have said that to you guys many times. We are not obsessed in any shape or form about leak tables, but we have always said Big is beautiful. We still believe in that very much. We will now move in, as a clear number 4 as the world's largest, asset light freight forwarders. And more importantly, you should note we will have a very strong position in air freight where we would be the world's 2nd largest method in volume and number 4 in, in both sea freight and road freight in Europe. So, it gives us some strength that we will utilize, hopefully, for the benefit of our shareholders. Page number 8 You can read it yourself. I'm not going to spend too much time on that. You can see how the service offering is split between DSV and Panalpina And I think it is pretty self explanatory, and I have touched upon some of the points before. The same goes for page number 9. You can see that we are diversifying the business mix and geography even more. We are, pleased about that in DSV that we are now becoming stronger, in particularly in APAC, where, the growth rates are much higher than what we see in EMEA, but also our very successful operations, in Americas will be enlarged. And, this is exactly what we have been trying to do for many years. And we are pleased about, that also. So on a pro form a basis, you can see on page number 10, some numbers, the revenues, we will just get just below 120,000,000,000 Danish Kronos in, in turnover. There will be, of course, an uplift in EBIT, and this is just the pro form a before Synagis, bear that in mind EBIT, and, you can see also the, the FTEs how we will be approximately a little over 60,000 employees. Speed is of essence now on page number 11. We, you can see, a timeline we have, done the pre announcement of the public exchange offer today. Now we will do, work hard to do the filings for all relevant authorities, then we will have to call into an EGM where we will ask the shareholders to approve the, the capital increase. And then we've will work towards, getting the regulatory approvals, as you can see. And we expect the settlement and the closing during Q4, and we will work our socks off to make this sooner rather than later. So before we go over to Q And A, Just some, key takeaways. We are very, very happy today, proud and honored that we have managed to make a deal with the board of, of Panalpina. We are also very excited about the fact that We have, close to 70% of the shareholders of the company supporting our offer. We think it makes a lot of sense it has the characteristics of a potential very, very high value creation for our own shareholders. And of course, the shareholders of Panalpina will also benefit from this. We've put 5 points down here that kind of sums up why we think it is a good operation and a good transaction for us. I have talked about it before, but I would probably touch upon the fact that we see some unique customer relationships vertical expertise and then operational excellence in the company. There's no doubt that there's a lot of skillful employees that, has a lot of, of knowledge and, it is no secret that every time we join forces with another company, we take a lot of new skills, a lot of new ways of working on board, And when I travel around the world to see GSE to G today, I can see clear footprints or markings of previous acquisitions, that we have done, we are all, coming from acquisitions. And we strongly believe that to be the case, going forward. There would be a lot of commercial synergies and cross selling opportunities also from the stronger network. And then, of course, there will also be some financial synergies in terms of, consolidation of operation and administration and logistics facilities. We will also have to, establish the joint IT infrastructure and leverage on, on the future digital investments. We believe this is maybe important for all our shareholders listening in that the, the target is to be, apps accretive in year number 2 after closing. And our aspiration is very clearly to lift the operating margins towards DSV's existing levels. We have done that in the past. And we, were very much, aspire also to do that you need to, to respect that we cannot talk too much about the business case. It will be inappropriate at this early stage and hard synergy numbers, but we, of course, look forward coming to coming back to you on that when we do the closing of the deal. I think, that was it for now. On page number 13, you will see the instructions as, how to dial in and, we'll be pleased to take your calls from now on. Thank you very much. Thank Our first question comes from the line of David Kerstens from Jefferies. Please go ahead. Your line is now open. Two questions, please. First of all, why did you change the offer structure from all cash to to all shares And I appreciate the comments around the capital allocation, but does it mean that you will resume your share buyback program now as well? Maybe related to this, what is the correct number of shares to work with? Is that the only 88,000,000 before the the 10,000,000 treasury shares? So will the 10,000,000 in treasury SP used in in the takeover. And secondly, regarding the, the synergy potential, how much do you anticipate paid will be from, yield improvement and how much from conversion ratio improvements? Is there any any measures you can take to to improve the yields for for Panapina and what I I saw your comments regarding the pair the share of perishables in the business. What is the share of value added services? Can you bring that up to a level in line with DSC? Thank you very much. Maybe I can talk a little bit about, of course, a transaction like this is very complex. We need to establish, an agreement with all stakeholders. We had, a good what you say, a very open and transparent dialogue with the company. And as we progressed in the dialogue, it was it became clear to us that, it would be beneficial, if the deal, should be done, so to say, to offer all shares. As Jens alluded to before, this is a little bit different to what we normally do. But we, taken everything into consideration. We, we felt that this was the right way to do it. When it comes to, to the synergies and then maybe Jens can talk about the capital allocation, there will be a great, great synergies coming from a conversion ratio, improvement. You're right, on that. We have seen that many, many times in previous transactions. And then our industry logic also tells us that there will be, a certain room for improving, the yields also, the combination to oversee the volumes in one system instead of 2 to use the buying power we have towards the airline and shipping lines and to operate, and to utilize the capacity much better than we do as 2 individual companies will for sure also mean that we will have, synergies and potential to uplift the GP margin. Unfortunately, we cannot quantifier that at this early stage. But maybe, Jens, a little bit on the share count and buybacks. So you're right. You know that currently, we have 1000000, 88,000,000 shares registered. We have had an AGM in currently cancelling 2,000,000 shares. So the right number going forward will be 1,000,000 plus the number of new shares that we issue, potentially when the deal closes. So I think that is a little bit on the share count. On the buyback, we will now evaluate how do we adjust the capital structure in the most efficient way do it just via the classic way we're doing it with safe harbor buybacks, or should we use a model where we can take a larger step at a certain period in time. We will then come back with some information about that. So you get more clarity on that, but I trust, you know, that you understand that it's, apart from stating that we keep our policy as is, we need to, to, do a thorough investigation before we, give guidance on a final roadmap. But, you can rest assure that nothing has changed when it comes to buybacks and the target capital structure we have in the company. And I think maybe that is the most important statement. We will not change our capital allocation policy. We will not de lever, we will continue to, redistribute the, the earnings and the cash flow back to shareholders and in a more, in a bigger way now, you can say when we don't take, on new debt. Great. Thank you very much, gentlemen. Good luck. And the next question comes from the line of Eric Bloor from Kepler Cheuvreux. Please go ahead. Yes. Good morning. Thank you for taking my question. The first is on the concession you alluded to and the cost extraction opportunity First of all, is that a fair guess that if we use a template of UTI and we take on board your target of raising Panapina's conversion ratio to your, a conversion ratio of 350,000,000 1,000,000 of restructuring charge would be necessary to combine the 2 entity. That would be the first question. Second, I was wondering if you had a chance to discuss the current trading situation with Panalpina and whether that meant that you were comfortable with the consensus estimate that the market currently have for this year especially given the weak airfreight market environment that we saw at the back end of last year. And the third question, is regarding the listing. Is there any plan to satisfy, obviously, some Swiss shareholders of Panapina to retain some Swiss Depository receipt or something of that nature that would allow them to remain shareholder of Swiss entity? That are my questions. Thank you. I think if we start with the last one, then I think on the listing we will evaluate this carefully. We have a bit of time before we close the transaction. We've had a few inputs on it, and we will see how many shares we are actually talking about because of course, it comes with complexity and cost. And I think, let's say it's only 1% or 2% of course, yes, that it's relevant for, then we'll probably not do it. But if it's a higher proportion, whereas of relevance, we will carefully consider it. So, that's basically it. On the current trading penalties. I think that you appreciate that we can't disclose anything about this. I think you are well aware to from what I hear about, you know, the market movement. And, I think that, I can say that in it's typically so that all players in the industry, they are sort of impacted by if the volumes go up or down. But maybe I can just chip in if the question was also if we had had discussions with the board. Of course, we have had discussions. We have been giving access to due diligence. So I think we have a fairly good idea about what is is the current trading right now. But we can't disclose anything on it. Then I think on the integration costs, I think I'll not say anything about a specific number because now we need to detail the plans, but in historical transactions, the integration cost has been similar to the level of synergies, typically. So at least, I think, from what we have seen so far, this will probably also be the case in this transaction. And then when we go a little bit further, we will come with a more precise information about this. But at this stage, in the transaction, apart from saying that we expect get to the DSU level, under relevant ratios, we can't say more now. Okay. Thank you. And the next question comes from the line of Casper Blum from ABG. Please go ahead. Thanks a lot. And also congratulations from my side. I know this has been high on the wish list for many years. If I may just a follow-up on the buyback and sorry for digging into this. I know you can't comment too much, but on the capital structure, maybe this is for Jens Lund, but would you be comfortable going all the way up to the to the maximum 2 times net debt to EBITDA in a period where you are integrating a company like Palapina? Or would you be more comfortable in maybe being a little bit lower? That's my first question. My second question and you mentioned the opportunities for cross selling more and even though DSV has been highly for the last many years, it's still been my impression that maybe one of the areas where you could improve a bit was cross selling between the different business segments in DSV. And is is it your impression that this is something that Panalpina has been better at doing than DSV and and is there some learnings that that can be taken from Panalpina here? Those are my two questions, please. Maybe I'll just answer the last one, before. You're right. We we have grown a lot. We've outgrown the market now after UTI. We're very pleased about that. We we have grown a lot with with our existing customers who who are apparently like what we what we give them, which is nice. We are pleased about that. We could improve between, we could improve when it comes to cross selling between the divisions. When we say cross selling, it is more offering now, a road capabilities to the Panapenos, to customers, which is, highly beneficial. We can also, offer last mile and distribution of the existing customers where Panalpina probably today will use external suppliers but also as the product becomes much more sophisticated now with Panalpina, I'm sure also our own Air and Sea customers will like what they see when we can come out with a much more competitive offer. We see, very clear strength in Panalpina on the commercial side. They have a lot of vertical competence also that we don't have in DSV and we're very pleased about that. And I think we can use that to our joint advantage going forward. Then, Jens, maybe on the buybacks, I think if we sit and look at it, as you say, we will definitely lever the company up and, and it will be sort of in the level that we are talking about, today or self or looking at I don't think it's a problem in integration to go close to that level that you're mentioning there because, when we set create a value as we go along, we will increase our earnings. And I think that's something we have seen before we are asset light. So we generate a lot of cash all the time. And we simply have to redistribute this to the shareholders in order to make sure that we stay lean. So, I think you can hear we are committed. That is very clear. Thanks a lot. And the next question comes from the line of Andy Chu from Deutsche Bank. Please go ahead. Good morning. Three questions if I could. Firstly, in your, outlook for EPS accretion, 2 years out, I guess, that's 2021. What sort of macro assumptions are you are you baking in? I mean, I guess we're I mean, maybe it has a crystal ball, but it feels there where it sort of quite late cycle at the moment. So so what sort of phasing in terms of, GDP growth do you have out, for the next couple of years? And secondly, in terms of the the deal, obviously, you're sort of keeping the sort of panel painter name, which unusual for DSV that would normally just rebrand everything to DSV. So, clearly, this deal is slightly different to, the previous large, large deal. So, So can you just sort of outline maybe sort of big picture? Do you have to do anything sort of big picture sort of differently in terms of, the deal and seeing synergies? Do you have to plateau a little bit around sort of headcount a little bit more than for other other deals? And then just coming back on the 3rd point in terms of, cross selling, I mean, the industry, I guess, has has, a pretty sort of, okay, sort of, ability to demonstrate sort of cross selling. So how will you do that? Will you give some hard targets and terms of cross selling over and above, you know, the odd example here and there of cross selling. But, you know, my view forward is worth is that cross selling in the industry is pretty hard to to achieve. And and and and secondly, you know, it's difficult to see from the outside, visible pros, progress on that front. Thanks very much. I think on the IPS accretion, basically the assumptions we're using is we use the OECD assumptions typically, when we make our forecasting, we do not claim that we are more knowledgeable in this area. So that's basically what we're looking at. So if you, for example, in the bank, you're working, have another macro scenario, which we see in certain banks, then, of course, you have to adjust for this, but I think that's at least how we approach it. I think when we talk about the brand or the name or concessions so that we cannot extrapolate synergies. I think what we've been very adamant about is that, of course, we can when we make a transaction of this nature, we can make sure that the acquired company can see themselves in the structure. I think actually Panalpina a particularly strong brand. So it's very good for us to get that brand on board. On top of this, of course, at the end of the day, we have to be able to extrapolate the synergies. Otherwise, we can't come back to our shareholders. So we have, the power we need to do the things that we typically do, when we make an integration and we haven't conceded anything about this. So I think It sounds a little bit negative when you talk when you use the word concessions. We don't necessarily see it as a concession that we had to concede on anything. This is something we have done willingly, we are excited about the name the brand is, as Jens said, you have to distinguish a little bit maybe from your industry. And then from the supply chain and logistics industry out in the markets, it has a very high quality So we are very proud to now associate ourselves with this brand also. And then I think on cross selling, I think we measure it internally these things. And I think what we have experienced on cross selling is that, as you say, it's always hard work to do the cross selling, but after UTI, we can see that the proportion of business that operate with 2 or more divisions has grown, and I think the complexity that comes with these large clients and the account planning, the whole executive sponsor plan that you have with these makes it possible for us to get access and to go in quote and bid, for these things. And we do have, you know, internal reporting statistics where we follow-up on it. And, as you say, it could be higher, but it's definitely an area where we are improving. So I think that's what you can say about this. It's always something, if you We don't put too much in a business case, on this, but we have put a little bit of emphasis in there as well. Right. Thanks very much. And the next question comes from the line of Markus Belender from Nordea. Please go ahead. Thank you. Two questions, if I may. First question regarding synergies. I mean, you you say that you're gonna lift the margin of the combined entity towards the current margin of DSV, which means that the you essentially means you're gonna lift the Panalpina margin to the same level as DSD. But since Panalpina is 90% air and sea, wouldn't it be more reasonable to assume that you could lift it towards your RNC division's margin. That would be my first question. It's clear that, that's also our aspiration for the business that is comparable to the business that we operate. But you have also to respect that we have said that out of courtesy, out of respect, for the whole transaction, it's to preempt the discussions to talk too much about the hard synergy numbers. We will be delighted to come back to you, with that later on, but you have to trust us. We think that we have a very strong strong case that, that 2% to the market. Okay. Understood. And second question, I'm getting this transaction, since you're paying all shares and kind of a lot of money. It's gonna be highly dilutive for your, Roy targets. So will you also come back and revise your your, your targets or at some point when you present the synergies? You know, if we sit and look this, I think, we said that we will readjust, you know, the way we capitalize, the company. I think if you define, invested capital as the, as, you know, a description of the asset, I think you will see that we have now, sort of exceeded our road target. I think this will mean that we get a slightly lower return on the invested capital. And then we will, when we have evaluated the whole thing make sure that we, still in line with the targets we've given, we'll probably even have to re address all our targets because as you know, we have 2020 targets out there right now. And I think that, as you say, they all have to be reassessed. Alright. Thank you. And the next question comes from the line of Edward Stanford from HSBC. Please go ahead. Two questions, please. First, in Bobby's slide, you talked about a joint IT infrastructure. Can you just perhaps go into a little bit more detail. Does that mean you'll be running parallel systems, or are you intending to migrate that panel tenancy or an IT system? In due course? And secondly, you talk about a joint integration committee. Is that different from the way you've dealt with say UTI or and does that limit your maneuver? Or is that consistent with previous deals? I think basically on the IT infrastructure, to and we have we will have one of each systems going forward. But of course, we see that Panalpina have, significant investments in IT Platt we have significant investments in IT platforms as well. Then we will evaluate carefully, which platform is best suited for the different services that we produce. It's not only one IT system. It's a software stack, you call it, and there, we will have to get more knowledge, but we will not run overlapping systems. That doesn't make sense in a global network business that you have systems that run-in parallel. I think that's a little bit on the IT side. When we talk about the integration committee, we have governance model that is very similar to the model that we have today. We have then, in order to give security of equal treatment, sort of, and at the top board, that doesn't participate in day to day business, but sort of oversees the transaction so that there's transparency on how we do it. I think that's something that is a little bit special for this transaction. We also did it on Fund Mars. I can remember So it's something we've done before. But I think this will work well. We have a good setup for that, and it shouldn't hinder us to do the day to day work. Oh, and please bear in mind also now that we will get also existing Palapina shareholders us on board now. And, of course, we have, made sure that we have aligned, so to say, the future strategy So, you should not see them in any shape or form as an opposition to what, what, the, the, the way that we normally conduct business, in in DSV. Thanks. And the next question comes from the line of Lars Heindorf from SEB. Please go ahead. Good morning. Thank you. Two questions from my side as well. The first, to insulin, maybe, is regarding the debt level. I've recalled the previous year. You mentioned that, there's some limits to high, high at depth levels you want. Hope partly onto some tax shield and tax reasons. Is there anything going forward that would prevent you from lever up above a certain level? Yeah. We've tried to set out, you know, a target gearing, you know, including IFRS 16 adjustments of approximately 2 times, so that we are below 2 times EBITDA. Of course, you also to bear in mind that the EBITDA can be somewhat higher given that the interest is so low, the interest rate, I think, still beneficial for the shareholder. If you look at it from a return perspective, that we do lose debt, in the way we bank holder company. So we will try to stick to what we have guided in the past. And then we might end up in a situation once we've evaluated the whole situation. We can't say that now where we say, okay, the tax rate might be percent higher, on a group level, if this is how we want to go about it. But then there will be a discussion, of course, and certainly what's the cost of capital. And what's the tax ratio, really? That's sort of, do you get a tax yield or not on the debt side? But I don't think given the interest sort of rates that we see right now, it shouldn't really make too big a difference and it's really cheap to bankroll in the company with it. So, hopefully that answers your question. Yes. And then also just a short one regarding on the buyback, will you conduct buyback in the second half of this year as you normally do or will you start these things now given the situation? We will try to put them into motion. As soon as we can. And here, we have to speak to a lot of lawyers. We have spoken to many lawyers right now. And then we will see how fast can we actually put them into motion. And then we will also, this time, as I spoke about, try to evaluate if we are allowed to put them into motion, should we readjust the model a little bit so that we has, you know, make sure that when we issue all these shares, there's some demand at that point in time. We could, perhaps structure a model that makes sure that there might be some shareholders that are not long term DSV shareholders, they were a long time, DSU, Panalpina shareholders. So we will probably have to think a little bit about how we can make sure that there's some demand at that point in time. But we are not we've been so focused on the deal, and we will surely come back to all you guys on the other stuff But we see that this is something that could potentially cause a bit of disturbance at that point in time. Okay. And lastly, regarding the IT systems, I know you've been implementing in the process of implementing the IT system and the road Is that gonna be put on hold? Or, I mean, have you can you share any thoughts on that now given the situation here? No. We will continue with that. There's no real sort of integration going on in road, luckily, so they can focus on on the things that they're doing, of course, there will be some customers they need to meet. And the cross selling, as we just spoke about earlier. But apart from that, they will continue, to do the work. They will have, of course, a bit of debate internally about resources and we now have enough time to try to calibrate this so that we are ready when we are ready to And the next question comes from the line of Damian Brewer from RBC. Please go ahead. Two questions, please. First of all, in the presentation, you talk about maintaining relevant functions and competencies in Switzerland, Could you expand a little bit more on what you mean by that? Is that effectively a subhead office in Switzerland or what is the anticipated outcome of what that would effectively do? And then secondly, given the IT issues being covered as much as you can, can you talk a little bit about customers where you've had any initial reactions or in particular, when you look at DSV and Panalpina, how much of the customer base overlaps and how much attrition therefore you'd expect to come out of this this combination? When it comes to the HQ functions, it's too early to say exactly how it's going to be, be made up. But of course, we will analyze very in-depth, the knowledge that, that, that we have in, in, in, around the globe, not only at the HQ, but I'm sure that, that Panalpina, they have some competencies that we don't have in DSV. If they sit in Basel, we would be more than happy to retain those. As we have always done, when we look at at previous transactions, we have retained a very, very large proportion of, of the skills, when we bought ABX, we have still a very large, what you say, operations, at their old head office in Brussels and, and also in certain places of UTI, are still very much intact also. When it comes to customers, we there's a lot of antitrust regulation that we need to adhere to, but we think that's a good mix. We have not had any reactions from many customers at this moment in time. Okay. Maybe if I could offset slightly differently. Given where we are post UTI, when you envisaged UTI at the time, versus where you are now, how much sort of attrition did you see where there was customer overlap in UTI, on outcome rather than anticipation? I think basically if we look at those numbers, you know, we typically, do use, sort of, 5% as, you know, in business case, on UTI actually, we saw less and also it's hard to measure because we had a few of there are customers that initially left because that experienced service issues. And I think now there was a transaction, and they said, now we've had it. I don't think you will find the same service issues in in in Panalpina. They run a very stable and and and powerful operation. So the customers, they will come with a different mindset here. But what is interesting on the UTI thing is most of these customers, they've actually come back afterwards now that we got our house in order. We had good relations with them. And then we managed to get in again. And, I'll say, if I look at all customer recording in general and on the major accounts, many of them, they actually come from UTI and we see that we grow quite a bit with them. So they are happy about our services. Of course, they get a broader offering And that's something that we typically don't put too much of in the business case, but I think if you look at our growth figures and stuff like that, that we have reported to the market, it clearly shows that there is some benefit there. We hope that we can do the same with with Panalpina and their customers as well. And, I think we're on the conservative side if we put 5% in there for the case. Okay, got it. Thank you. And sorry, can I just ask one other which is just on working capital? Clearly, if you look at Panalpina's Q4, there were some sort of working capital issues as they implemented their own IT system changes. At this stage, does your business case and assumptions about the way you combine make any assumptions on working capital? Obviously, that was one of the big surprises with UTI you're able to make significant inroads into the working capital in UTI. Is there any assumption for that at this stage in Panalpina? Or is it just an assumption that that stays as it is and that's an additional windfall if you get it? I think we put really a big changes in the working capital, and they have, a fairly high proportion of larger customers. And we also see that with all larger customers that they ask for certain terms and conditions. I actually, tend to believe that when you implement new IT, then it's always something you can see in the working capital. So you know, I think it's actually quite a relevant explanation that they have come up with at the year end how much can be sort of recovered or how much is due to the IT and the commercial pressure. It's always hard to tell. And it also depends on the date, because, you get maybe the payments 1 day later, 1 day earlier, and it means a great deal. But but still Damien, I guess, we can say when the integration is over, 2, 3 years from now. We expect that the combined net working capital is better than it would have been as 2 individual companies. So of course, there is something, it's difficult to quantify. We've not put it into the business case, so it would be some potential extra uplift you could say. Thank you. The next question comes from Neil Glynn from Credit Suisse. Please go ahead. Your line is open. Good morning. If I could ask 3 questions, please. The first one, just a quick one. I presume that the Palapina dividend that's been proposed, there's no change to to that planned payout, assuming it's approved. Just wanted to clarify that that is the case, per your understanding. And then 2, on the commercial opportunities, hopefully open them to you, but also the incremental homework required to take advantage of them. Just interested For one, do you know, where Palapina customers currently procure road freight solutions? And any color on your understanding there would be very useful. And the second on that, Asia Pacific is the greatest disparity in terms of, size or the proportion of each network and is bigger than you in Asia in terms of revenue. So how different is Panopino's approach to Asia per your understanding? And is it likely that it's Asian business it's Asian sales effort will be folded into DSV's approach or is there a scope for a more combined approach in Asia going forward? I'll just take the 2 last questions. It's far too early to say anything about it. We, we are very pleased about the size and the operations in APAC. I think a combination will be great. Like everything in a transaction, it would be the best of 2 worlds. So we will carefully analyze the systems and then we will, going forward be a combination. So, I think basically that's what we could say. They they have they have especially within airfreight, Panalpina is organized or they they operate a little bit different from what we do with some fixed capacity and we're also, excited to learn more about that. So I think there's a great, potential, in this combination. When it comes to road freight, it's just simply not information. I have access to, I don't know where they procure, road freight. Some of them probably procure it by GSV. Oh, that's good to do it with, with both smaller local companies and some of the big guys, but if we can combine the services, I think we have a value proposition for the clients. Think it's important that when you do, due diligence, you get no names, information on customer and vendor data. Otherwise, you would violate, you know, competition regulation. And that's certainly something that we don't want, because then we get the Danish commissioner after us, and that's not good because he writes big fines. So we've been very diligent when it comes to that. On the dividend side, it's a penalty decision, you know, they will pull through the dividend. It would be a pre implementation if we sort of ask them to do, something else, but there's a mechanism in the contract that if they take out capital, it will be adjusted at closing on the exchange ratio. So I think that's basically you know, they'll be paid, what is equivalent, closing 2.375 DSV shares. And if they want to sort of take a little bit of the return upfront, then they are allowed to do so. But in the long run, it should be the same. Understood. But just to be doubly clear on that given that that's already effectively a sunk decision or a sunk proposal, that still would be reflected in in the mechanism? I don't know if you didn't hear it, is we had some problems with, with, the technique. Sorry, just to repeat that. So Panalpina has obviously proposed the dividend already. So that predates this transaction on the agreement, but it still would be captured in any adjustment, or are you just talking about any decisions that are made from here on out? No. If that was not the case, we would have written 2.375 plus the dividend. Okay. Thank you. And the next question comes from the line of Tobias Cetick from MidFirst Bank. Please go ahead. Yes, thank you. Just two smaller for me is remaining. Firstly, following up on Edward's question on the integration committee, could you just elaborate what the mandate of that committee is. Does it have any formal say in the integration process, or is it just an advisory committee? And secondly, Jens, you said you were allowed to do due diligence. Could you just expand a little bit on how deeply you've been allowed to look into Panapina's book over the past 2 months? Thank you. I think if we take the integration committee, what it will do is it will secure that there's framework in place so that we get a fair and equal treatment of all our employees That's the one thing that it will do. And the other thing is that it will receive reporting on how, we are progressing, when it comes to that. So I think that's the role of the committee, so that we ensure that also our new colleagues, they have the same sort of chance in an integration And it's not, sort of biased, you know, unfairly towards, towards DSV I think that's basically the role of the committee. Then, when it comes to the due diligence, I think we've had sort of a customary due diligence for this type of process. And we've had a chance to ensure that we can give comfort to our own board that this is a solid company that we're buying, that it's a house that is well kept and well in order. And we were happy to confirm that. And the next question comes from the line of Robert Johnson from Yvette BNP. Please go ahead. Good morning everybody and congratulations from my side as well. Just first question on the margin targets. You've obviously said that the aspiration is to lift the margin towards the DSV level. But clearly you did better than that with with UGI with the DSV margin now standing materially above where it was before that deal. I appreciate it's too early to talk about synergies in any detail, but Is that a possibility in this case as well, are there any factors that would make that more difficult, I, in this instance? Yes. I think that's always a possibility. We've said it many times that, the larger we got, the more productivity we could get out of it. But to use this as an assumption in a case, it's quite a bold statement. So, we typically go with what we know And if there's some extra uplift or whatever on the productivity side from what we know today, then, that will be, a nice surprise. And then just second question on the cash returns. Are you historically DSV, DSV has made progressive share buyback in addition to the dividend, but I guess the nature of this deal would suggest that a larger one off return is possible Is that something which is being considered or is it just too early to say? I said, we would like to readjust this, capital structure situation that we have. And we would also take into consideration when the deal closes so that there's no overflow at that point in time. So that's sort of two things that we're looking into, how to, to structure that in, what can I say in the most constructive way? And if the question was, if it could be like you said, a special dividend, then you should probably assume that, it's more in the form of, of buybacks than special dividends. Got it. Okay. And then just a final question, a bit of a housekeeping one really. You said that 20% of Panalpina's air freight volume is perishables and 5% customer controlled. And then in Ocean, that 35% of that volume is freight management services on non NVO CC. Could you just tell us what the corresponding figures are for DSV on a stand alone basis? Think I can do that. I think we have, sort of virtually no perishable business, and we have no customer control on the air freight side. And when it comes to the sea freight, I would say it's less than 5% freight management. I don't know if we do it somewhere, but it might be that we do it here there. So we would just to be on the safe side. We will say less than 5% is probably closer to Nil. And the next question comes from the line of Fin Biegelsen from Danske Bank. Please go ahead. Yes. Good morning, and congratulations from my side as well. It seems like a little bit structure than than the normal deal. You do, but I'll just have two questions as opposed to my questions already answered. I would say, what what is, in particular, what is the, what is that that you're most happy about with the deal? And secondly, whereas you see the biggest Yeah, which is some good questions, Finn. So, we are we are pleased about the fact that we have managed to, to join forces. We're one of the, of the the strongest players within our space. It's a combination we have been looking at from years. I think you, yourself, you have even made some, current reports, what should happen if we were successful. So it's also something that we see that there has been some speculation about I think what, what excites us about it is, of course, that we think it can generate value for our shareholders and for our customers. This is of course, extremely important, and that is basically why we go to work. Of course, we can also, create a fantastic work environment for our staff. We have grown the number of people with 3000 since we bought UTI. So we will also generate jobs going forward. Of course, there's a whole risk catalog we go through when we do an acquisition like this. And of course, it is it is important to maintain the value in the company by, in form of, the employees and the customers, and we have a plan to safeguard that. So Of course, we need to, to have a firm hand on the integration of IT also on, on, apart with, unless that happens, course, that also represents a risk, but we have certain expertise when it comes to that. And I'm sure that we will follow our plans and we will do what is necessary on the IT side also. So if you if you'd help to summarize it, if I just the the final question, what is different from previous acquisitions? I would say not a lot. I mean, compared to our our size now, it's not more, complex than what we have seen. It's, it's a crystal clear, Air And Sea business, by most at least, Palpina, we are happy about that. I don't think you should consider it as very different from what we have done in the past. You might sense that it is, different. It's just a, a sign that we do show the deepest respect for, for the, for the value of the company, and of course we want to illustrate also to the shareholders of DSV and also Panalpina that we take this extremely serious and that we will take good care of, of the money and the investments of the shareholders, but but also believe me, it's, it's a, it's we have a solid business case behind it. And the last question comes from the line of Daniel Lavowska from Bernstein Research. Please go ahead. Thanks very much. Gentlemen, congratulations for me as well. Two questions, if I may. I'd like to come back to the question Ed asked earlier in respect to the systems landscape. Given the different customer and product structures between diesel and Panalpina, And looking at CargoWise and SAP, respectively, do you see both systems capable of handling the combined business on C and A are today already? Or is there more work? And if there is more work, what are the respective areas you would most likely do some more work on to kind of see which of the systems, will stay around because you said earlier, you were striving for a combined system stack in the end. And secondly, One of our DSV's core use piece has definitely been a high degree of standardization, throughout its business, driving a better conversion rate. Also given Panalapina a slightly different mix in customers and in products, do you envision that to change, kind of going back the UTI deal, or you took some cuts to the revenue portfolio, or how do you think about that going forward in the combined entity kind of the change of, let's say, product and customer strategy? Thanks. I think we have to discuss first the assumption for the conversation, I think actually that, there's been a perception in the market that Panalpina has larger customers than we have. This is not the case. And I think that changes the whole debate about this. So it means that we already have the capabilities that is required in order to produce, the volumes on our platform. But that doesn't mean that it necessarily should be our platform. It could easily also be there, platform that we will use, we have to evaluate, this carefully. Of course, as you briefly touched upon, we do have a high productivity. So we need to understand, many things that lead to productivity. It's not only that you buy a computer program, but it's also how you are organized and stuff like we will have to go in and evaluate this. I think if you look at, customer reporting, customer interaction in general, booking platforms, whatever. I think everybody's looking at, you know, consolidated infrastructure, consolidated data. And that's what you call standardization. It's probably fair to say that we've been working hard at least in DSV on this. I know that been a lot of hard work in Panalpina as well. So to sort of, to measure that, going forward, I don't think from a service point of view, we don't have issues. With the customers. But I think, of course, we have to figure out how we do it in the right way, together with the customers. But I think it's important that we eliminate this conception that has been in the market that, we have some small customers, and, we don't serve customers with a certain size. I think that's, that's probably something we've not been too clear about either. So, so I think, you know, we can clear away at least this this sort of misconception. Okay. Maybe if I could kind of rephrase that maybe. So does that mean that the kind of percent of revenues in the combined entity by large, medium, small customers, have you would want to look at this, would largely stay unchanged from, these fees positioned today? I don't think it will be, a very big, difference, from from what we see today. Actually, So I think that would be the same. I think also if you look at the numbers, of course, on the air freight side where you would expect some kind of on the seafreight, we've had the same volumes as Panalpina had. And of course, on the control side, on the air freight, excluding the perishables, I think we have a similar type of operation. So I think it cannot surprise that that we also have a customer mix that is fairly similar. I also remember that our customers, they also come from UTI, ABX, And I think if you go way back with the DSV, we probably had smaller customers at that point in time. Okay, very clear. Thank you. Okay. Thank you very much for your interest and extensive questions. We were pleased to, that we could, answer them. We will stay close to the investor community. If you have follow-up questions, you know, how to reach us, we will now go to Switzerland. We look forward to seeing our new colleagues, in parcel in some hours. It's a day of joy at DSV today. We are pleased about this achievement. We know that we have some hard work ahead of us. We assure it will be a great and successful combination And I'd like to thank all the employees of DSV for also making this happen. And also, I'd like to use this opportunity to welcome all, our new colleagues at Panalpina, if you're listening in, I think you will, like what you see, and together, we will be much stronger than we were as 2 individual companies. So Thanks for listening in. We will get back to you when we have, the Q1 numbers coming out. And in the meantime, we will stay in touch. Thank you, and bye bye.