Advent to buy UK’s Hermes for €1bn

Advent International will acquire 75 per cent of Hermes' Leeds-based UK business, which delivers parcels for retailers including Next and John Lewis

                                

US private equity firm Advent International is to buy the UK operations of Hermes parcel delivery group and take a minority stake in its German business in a €1bn deal.

The buyout group will acquire 75 per cent of the company’s Leeds-based UK business, which delivers parcels for retailers including Next and John Lewis, from the German mail-order group Otto. 

It will also take a 25 per cent stake in its German business. 

The combined purchase price of the two stakes is about €1bn.

Online shopping is “booming as a result of coronavirus,” said Martijn de Lange, chief executive of Hermes UK, and it needs investment from Advent to expand its delivery operations.  

Parcel delivery has typically been a low-margin business, and the UK has a more competitive market than many other European countries. Forty per cent of top UK online retailers use Royal Mail, while 36 per cent use DPD and 31 per cent use Hermes, with some using more than one delivery group, according to a 2019 report from Apex Insight. 

Frank Proud, director of Apex Insight, said Hermes’ UK business “is consistently growing market share, faster than a growing market, with industry-leading margins.”

However, he warned that any move by Amazon to compete with Hermes’ core business of serving retailers would be very difficult for the UK business. 

Hermes’ UK operations made £46m in pre-tax profit in the year to February, up from £36m a year earlier. Advent already owns Integer and InPost, Polish parcel-locker businesses.

No plans have been made to merge those with Hermes.

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