The private equity investor, Advent International, has acquired 25% in Hermes Germany and 75% in its UK subsidiary, Hermes UK. The transaction will facilitate further investment by Hermes in technology and infrastructure, and support the future growth of the business in the rapidly growing parcel delivery sector, both parties emphasize.
FedEx is out, so are Alibaba and Amazon: names which were much speculated about in recent months as potential Hermes partner contenders. Instead, the Hamburg, Germany-based mail order giant, Otto
Group, picked U.S. private equity firm, Advent, as the investor for its logistics subsidiary, Hermes, both in Hermes‘ home market, Germany, and on the British Isles.
No management changes
In its core market, Germany, Otto will retain a majority stake in Hermes, while in the UK, the Otto Group will be relinquishing its majority shareholding, but has secured itself the final word in important strategic decisions. The operational business will be continued by the current managers in charge. The transaction is still subject to approval by the boards and relevant antitrust authorities.
In an announcement, Otto stresses that the partnership with Advent “gives both sides further scope for important investments and creates the conditions for future growth.” Particularly since the outbreak of the Covid-19 pandemic, e-commerce is growing strongly, benefitting parcel delivery companies such as Hermes, DHL, UPS, or ZTO Express, as an increasing number of consumers tend to shop online.
“Outstanding market position”
The parties remain tight-lipped about the price paid by Advent for the acquisition both in Germany and the UK. However, market observers estimate it to be in the billion-euro range. In the past financial year, Hermes transported 928 million shipments, generating revenues of 3.5 billion euros (+9% y-o-y). Two thirds of the sales were generated in Germany and the UK. In 2020, growth is expected to be significantly higher, stimulated by the changed shopping behavior.
“The high level of interest in an investment in our logistics subsidiary, Hermes, reflects the attractiveness of the online business and the outstanding market position of Hermes in Germany and Great Britain,“ Kay Schiebur, member of the Executive Board of the Otto Group, commented.
Despite its economic success, the reputation of the company is tarnished as result of a series of labor conflicts both in the UK and in Germany, in connection with employment contracts. For example, Hermes circumvented social security contributions, claiming that drivers and couriers are self-employed, and not on the company’s payroll. In a judgement against Hermes, a court in Leeds recently decided that drivers and couriers are Hermes employees in spite of the company’s claims that they are self-employed.
General secretary, Tim Roache of the General, Municipal, Boilermakers and Allied Trade Union (GMB), said that “the judgment shows the gig economy for what it is – old fashioned exploitation under a shiny new façade.” He went on to say: “Bosses can’t just pick and choose which laws to obey. Workers’ rights were hard won. GMB isn’t about to sit back and let them be eroded or removed by the latest loophole employers have come up with to make a few extra quid.”
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