OMERS, GIC and Wren House Acquire Direct ChassisLink

GIC, OMERS Infrastructure and Wren House recently announced they will acquire Direct ChassisLink Inc., one of the largest chassis lessors in the US:

GIC, OMERS Infrastructure and Wren House have announced the signing of an agreement to jointly acquire Direct ChassisLink Inc. (DCLI) from investment funds managed by Apollo and EQT. DCLI is a leading chassis provider in the U.S., enabling over-the-road transportation of containerized freight to and from ports, railyards, and customer locations. Terms of the investment are not being disclosed.

DCLI is one of the largest chassis lessors in the U.S. With over 151,000 marine and 100,000 domestic chassis in its fleet, DCLI operates out of strategic locations across key port and rail terminals in the U.S. DCLI is headquartered in Charlotte, North Carolina, and employs approximately 410 employees.

Ang Eng Seng, Chief Investment Officer of Infrastructure, GIC, said: “As a global long-term investor, GIC seeks to invest in world-class companies. GIC is excited to partner with like-minded investors, OMERS Infrastructure and Wren House, to acquire DCLI, one of the largest chassis lessors in the U.S., providing infrastructure to facilitate trade.”

Boon Chin Hau, Managing Director and Head of Infrastructure Americas, GIC, said: “In the U.S., intermodal transportation is on the rise, as companies seek to drive down transport costs and reduce their carbon footprint. As a market-leading chassis lessor, we firmly believe DCLI is well-positioned to capitalize on this growing trend. We look forward to supporting DCLI’s management team as they continue their impressive growth.”

Gisele Everett, Senior Managing Director and Head of Americas, OMERS Infrastructure, said: “We’re pleased to be making this investment on behalf of OMERS alongside GIC and Wren House which, like OMERS Infrastructure, pride themselves on a long-term approach to asset management and value creation. Following the close of the transaction, DCLI will become OMERS Infrastructure’s eighth global investment in transportation and mobility, adding to our portfolio including roads, bridges and ports around the world.”

Philippe Busslinger, CEO of Wren House, said: “We are very excited to invest in DCLI, an exceptional company in the U.S. transport sector. We look forward to a long-term collaboration with its industry-leading management team, GIC and OMERS. This second investment for us in North America supports Wren House’s long‐term goal to build a global quality infrastructure portfolio with outstanding management teams.”

“This agreement underscores the tremendous growth DCLI has enjoyed since our founding in 2012 and all we do to serve the nation’s intermodal transportation system,” said Bill Shea, DCLI CEO. “We thank Apollo and EQT for investing in our success, and look forward to working with OMERS, Wren House and GIC to sustain those investments and do even more to serve our customers’ supply chain needs.”

The closing of the transaction is expected in H2 2022, subject to customary closing conditions, including regulatory approvals.

Before I get to my thoughts, a few more comments.

Sovereign Wealth Funds comments that a large piece of America’s supply chain was just bought by eastern sovereign wealth funds and OMERS:

Singapore’s GIC Private Limited, OMERS Infrastructure, and Wren House, the infrastructure sovereign wealth enterprise of the Kuwait Investment Authority, have announced the signing of an agreement to jointly acquire Direct ChassisLink Inc. (DCLI) from investment funds managed by Apollo Global Management, LLC and EQT Infrastructure. DCLI is a chassis provider in the U.S., enabling over-the-road transportation of containerized freight to and from ports, railyards, and customer locations. The closing of the transaction is expected in the second half of 2022, subject to customary closing conditions, including regulatory approvals.

DCLI is one of the largest chassis lessors in the U.S. With over 151,000 marine and 100,000 domestic chassis in its fleet, DCLI operates out of strategic locations across key port and rail terminals in the U.S. DCLI is headquartered in Charlotte, North Carolina, and employs approximately 410 employees. Chassis are the steel frames on which trucks carry shipping containers. Chassis are an essential part of the transportation value chain and are used to carry containers between ships in port and local destinations, as well as to and from intermodal hubs for long haul transport by rail or truck. DCLI is a major player and its falling into the hands of sovereign funds and OMERS. DCLI’s customers consist primarily of container shipping companies, railroads, motor carriers, beneficial cargo owners, and other logistics companies who use DCLI’s chassis under long-term contracts. Will the new sovereign wealth owners seek higher prices for upcoming long-term contracts?

Backstory

Littlejohn & Co. carved Direct ChassisLink out of Danish shipping giant Maersk in 2012, and then sold it to EQT Infrastructure in 2016. In 2017, Direct ChassisLink acquired a fleet of approximately 73,000 domestic chassis from TRAC Intermodal. On March 7, 2019, funds managed by affiliates of Apollo Global Management acquired Direct ChassisLink and Blume Global, Inc. from EQT Infrastructure (EQT Infrastructure II and EQT Infrastructure III funds) for around US$ 2.5 billion including debt. EQT Infrastructure had retained a 20% stake in DCLI and Blume Global. Blume Global allows Direct ChassisLink customers to use a single information technology platform for reservations, tracking, and billing of both chassis and containers. Likely when it came to selling DCLI, Apollo was looking at rough U.S. IPO markets and opted to satisfy the hunger of sovereign wealth funds’ appetite for U.S. infrastructure assets.

Dan Primack of Axios also comments that Direct ChassisLink buyout is a major shakeup in America's supply chain:

A key part of America's supply chain infrastructure will now be owned by a trio of foreign investment firms, as Charlotte-based chassis lessor Direct ChassisLink agreed to be acquired by GIC, Omers Infrastructure and Wren House.

By the numbers: DCLI is the country's largest intermodal chassis provider, with over 151,000 marine and 100,000 domestic chassis in its fleet.

Details: GIC is a Singaporean sovereign wealth fund, OMERS is a Canadian pension and Wren House is a British private equity firm. No financial terms were dislcosed.

Be smart: Don't be surprised to see CFIUS take a hard look at the national security implications of this deal, particularly given all of last year's marine port bottlenecks.

It seems like everyone has an opinion on this deal.  

Just for your information, on the role of CFIUS:

CFIUS is an interagency group that reviews proposed foreign investments in the United States—specifically mergers, acquisitions, or takeovers—to determine whether they threaten U.S. national security. If a CFIUS review finds a threat, the president has the authority to block investment or require mitigating measures, if (1) other U.S. laws are inadequate or inappropriate to protect national security; and (2) there is “credible evidence” of a threat. The presidential determination must occur within 15 days after receiving a report from CFIUS.

Now, I don't view this transaction as a threat to US national security, at least no more than having this company owned by Apollo and EQT, so I'm a bit perplexed as to why Dan Primack would write this.

The CFIUS didn't block CPP Investments' acquisition of Ports America, one of the largest US terminal operators, and I don't see why it would block this deal.

Also, GIC, Wren House and OMERS Infrastructure are long-term investors looking to help Direct ChassisLink Inc. (DCLI) grow its operations. They will provide long-term capital and their deep expertise and network to the company.

One of the key statements on this deal was made by Boon Chin Hau, Managing Director and Head of Infrastructure Americas, GIC:

“In the U.S., intermodal transportation is on the rise, as companies seek to drive down transport costs and reduce their carbon footprint. As a market-leading chassis lessor, we firmly believe DCLI is well-positioned to capitalize on this growing trend. We look forward to supporting DCLI’s management team as they continue their impressive growth.”

There are favorable secular tailwinds underpinning this deal and focusing on the short-term (potential US and global recession) isn't the right thing to do when trying to understand why these long-term investors are acquiring this company that is a leader in intermodal transportation.

As far as increasing prices on long-term contracts for DCLI's customers, that is all speculation right now as the new owners will be under the same regulatory scrutiny as the previous owners (who by the way didn't hike up prices!!).

They are looking to grow operations through strategic acquisitions, organic and inorganic growth and value creation, not to hike up fees as soon as possible.

Anyway, take the time to read more about Direct ChassisLink:


Some key highlights:

  • The company is the largest provider of marine and domestic container chassis to the U.S. intermodal industry.
  • They have a strong focus on safety and sustainability to ensure that they provide their customers with reliable equipment for every move.
  • They offer chassis for daily use via their DCLP proprietary pools and other pool models and lease chassis for longer-term use via their DCLL offering providing flexibile chassis provisioning that can be customized for each customer’s unique business needs. 

What else? I looked into the news on the company's website and noted this press release from 2019 when Apollo acquired a majority stake in DCLI and Blume Global:

Funds managed by affiliates (the “Apollo Funds”) of Apollo Global Management, LLC (together with its consolidated subsidiaries, “Apollo”) (NYSE: APO) today announced they have entered into a definitive agreement to acquire Direct ChassisLink, Inc. (“DCLI” or “the company”) and Blume Global, Inc. (“Blume Global”) from EQT Infrastructure (“EQT”). As part of the transaction, EQT will retain a 20% minority stake in DCLI and Blume Global. The transaction, which is conditioned on customary regulatory approvals, is expected to close in the second quarter of 2019. Financial terms of the transaction were not disclosed.

Since its launch in 2009, DCLI has grown to become the leading North American provider of domestic and marine chassis to the intermodal supply chain. The company operates an extensive network of approximately 235,000 chassis across more than 450 locations, meaning nearly one in every three containerized shipments in the U.S. uses a DCLI chassis.  Chassis are an essential part of the transportation value chain and are used to carry containers between ships in port and local destinations, as well as to and from intermodal hubs for long haul transport by rail or truck. DCLI’s customers consist primarily of container shipping companies, railroads, motor carriers, beneficial cargo owners, and other logistics companies who use DCLI’s chassis under long-term contracts.

Blume Global has developed a digital supply chain platform leveraging its 25-year history of data-driven insights across its vast global logistics network. Blume solutions enable logistics service providers, asset owners, carriers, and globally recognized brands in retail, manufacturing, healthcare, hi-tech and more, to gain real-time visibility across their supply chains, drive intelligent logistics execution based on data insights, optimize their supply chains end-to-end, manage the lifecycle of assets globally, and automate financial settlement. Since 1994, Blume Global has built a trusted platform in the global supply chain space with its integrated network and data insights across nearly 100 countries, more than 1,400 offices with 300+ IMCs, and 6,000+ motor carriers, and managing approximately 300,000 intermodal assets. The Blume Platform processes approximately $1 billion in transactions for customers with 99.99 percent billing accuracy.

“We are excited to have the support of a world-class financial sponsor like Apollo as we look to grow our asset provisioning business, expand into new adjacencies, and capitalize on the tremendous market opportunity for Blume,” said Bill Shea, CEO of DCLI. “EQT’s vision and backing have allowed us to grow rapidly over the past few years. We are thankful for EQT’s ongoing support and we welcome Apollo to the DCLI family.”

Antoine Munfakh, Partner at Apollo, said, “We are thrilled for the Apollo Funds to acquire what we believe are two incredible platforms in DCLI and Blume Global. Over many years of strong and steady growth, DCLI has established itself as the clear leader in domestic and marine chassis provisioning – a critical component of the intermodal supply chain. In DCLI, the Apollo Funds are acquiring a market leader with scale, breadth, well-established customer relationships, and significant organic and inorganic growth opportunities. In Blume Global, the Apollo Funds are acquiring a high-growth company with unique data advantages that allow it to solve critical problems for its customers, offering better visibility and more efficient supply chain orchestration.  Most importantly, both DCLI and Blume Global are led by exceptional and proven management teams. We are excited to bring Apollo’s resources to bear in helping DCLI and Blume usher in their next wave of growth.”

Barclays PLC served as the financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as the legal advisor to the Apollo Funds in this transaction.

Citigroup Global Markets Inc. served as the financial advisor and Simpson Thacher & Bartlett LLP served as the legal advisor to the Company in this transaction.

About Direct ChassisLink, Inc.

DCLI is the largest provider of marine and domestic container chassis and a leading provider of asset management services to the U.S. intermodal industry. The company owns, leases, and manages over 145,000 marine chassis and 89,000 domestic chassis. DCLI’s strategic partnership with Blume Global (formerly REZ-1), which began in 2014, uniquely positions the company to deliver value to its customers across the supply chain ecosystem via Blume’s Digital Supply Chain Platform. DCLI has a strong focus on safety and sustainability and is a participant in the U.S. Environmental Protection Agency’s (EPA) innovative WasteWise program. For more information, please visit www.dcli.com.

About Blume Global
From the world’s largest global retailers, manufacturers and consumer products companies to the smallest local drayage trucking companies, success depends on end-to-end visibility and orchestration of global supply chain networks across every move, every mode and every mile. With its AI-enabled, data-driven digital platform and solutions for real-time visibility, logistics execution, asset management, optimization and financial settlement, Blume Global leverages 25 years of data insights, its globally connected network, and advanced technologies to help enterprises be more agile and responsive, improve service delivery and reduce costs. Learn more at blumeglobal.com.

About Apollo Global Management

Apollo is a leading global alternative investment manager with offices in New York, Los Angeles, San Diego, Houston, Bethesda, London, Frankfurt, Madrid, Luxembourg, Mumbai, Delhi, Singapore, Hong Kong, Shanghai and Tokyo. Apollo had assets under management of approximately $280 billion as of December 31, 2018 in private equity, credit and real assets funds invested across a core group of nine industries where Apollo has considerable knowledge and resources. For more information about Apollo, please visit www.apollo.com.

That was a little over two years ago and every reason behind Apollo's acquisition is still valid today, if not more so.

EQT did a great job nurturing and transforming this company into a transportation infrastructure play and Apollo saw the value in it and invested in it.

They have now decided to sell DCLI to GIC, Wren House and OMERS knowing these funds very well and knowing how nicely this asset fits in their respective infrastructure portfolios.

In the press release, Gisele Everett, Senior Managing Director and Head of Americas, OMERS Infrastructure, said: “We’re pleased to be making this investment on behalf of OMERS alongside GIC and Wren House which, like OMERS Infrastructure, pride themselves on a long-term approach to asset management and value creation. Following the close of the transaction, DCLI will become OMERS Infrastructure’s eighth global investment in transportation and mobility, adding to our portfolio including roads, bridges and ports around the world.”

And Philippe Busslinger, CEO of Wren House, said: “We are very excited to invest in DCLI, an exceptional company in the U.S. transport sector. We look forward to a long-term collaboration with its industry-leading management team, GIC and OMERS. This second investment for us in North America supports Wren House’s long‐term goal to build a global quality infrastructure portfolio with outstanding management teams.”

Philippe Busslinger used to work at OMERS Infrastructure as Head of Europe. He departed that organization in October 2021 to become the CEO of Wren House, the London-based global infrastructure subsidiary of the Kuwait Investment Authority.

I covered Philippe's departure from OMERS here.

It's not lost on me that Philippe Busslinger who now heads up Wren House worked with GIC and his former employer to make this deal happen.

I think that shows how much mutual respect they have for each other.

It’s also worth noting that Wren House is a partner of OMERS on many great deals, including London City Airport (along with OTPP), so they have worked on big deals in the past.

Alright, let me wrap it up there.

Below, learn why DCLI invested in the quality and operational efficiency of our proprietary Direct ChassisLink Pools (DCLP) across the country and continues to work on every aspect of the pools to ensure that its customers have access to reliable, quality chassis when and where they need them.

Also, when you lease a refurbished chassis from DCLI, you're getting all the benefits of a brand-new chassis, including lower maintenance costs. 

Pretty cool company and now OMERS, GIC and Wren House are in charge of helping it grow during its next stage. This will be another great long-term investment for all three outfits as they grow their infrastructure portfolios and look to decrease their carbon footprint.

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