Property group Westbury is buying Stobart for £138m - but what form will the new company take and which direction will it go in? Eddie Stobart will launch onto the London Stock Exchange (LSE) in September following a reverse takeover by Guernsey-based property group Westbury. This positions the company for large developments in multimodal business. The deal, announced last week, comprised the purchase of Stobart by Westbury for £138m while Stobart's former parent company, WA Developments, bought £142m worth of Westbury's property portfolio. The newly formed Stobart Group Ltd also purchased rail freight outfit O'Connors for £23m, which comes with extensive rail and port-facing land.
Westbury was better known for general property investment but in 2006 announced its decision to switch focus to transport and logistics land. Andrew Tinkler, now chief executive officer of the Stobart Group, says: "Westbury was a really good fit to bring into the business. It fits what we want to do with developing 
more on rail and the waterways."
The property company owned the port of Weston in Runcorn, as well as AHC, a warehousing and rail company just across the channel at Widnes. O'Connors is located next to AHC. Tinkler says the plan is to develop "one million square feet" of warehousing space and create an intermodal model, taking deep sea freight from feeder ships and placing it on road, rail and internal waterways. When the model is perfected he hopes to make further acquisitions that will allow the group to replicate it elsewhere in the country.
William Stobart and Andrew Tinkler will continue to lead the board of the new group and will own a 28% stake in the new company. The Westbury shareholders will vote on the merger on 19 August but no opposition is anticipated. The new company will appear on the LSE on 20 September. Freight Transport Association external affairs director Geoff Dossetter says: "We must all recognise that the public perception enjoyed by Stobart has been a force for good 
for road transport. Its new strategy fits entirely with the new attitude we are seeing from government, with the emphasis on the completion of the job rather than the mode of delivery."
Expert reaction
Chris Morgan, lead analyst with Datamonitor's logistics and express research unit, says the new group will enjoy a competitive advantage over pure road haulage companies - but warns that the overland industry will remain a tough environment to compete in. "This is a good strategic move for Eddie Stobart, as the road freight industry is at a crossroads. On the upside opportunities will arise in Eastern Europe, where there is growing domestic demand in the accession countries, as well as the relocation of an increasing amount of manufacturing facilities, from which output needs to be transported back to consumers in Western Europe. Furthermore, there are potential markets for chilled logistics in the food and pharmaceuticals sectors.
"On the downside is the high fragmentation of the industry, high fuel prices, potential road tolls, drivers' hours restrictions and low margins. Consequently, the ability to offer a multimodal service will be a distinct competitive advantage over other pure road transport companies, particularly those that are UK-focused. A listing on the stock market would also bring much needed additional funds to expand its facilities - particularly an intermodal port - and fleet."
Overall he concludes that the combination of the two players makes sense, given that both have UK facilities - although the new entity will still find the going tough as the road transport industry remains fiercely competitive due to the low barriers to entry in this sector. As a result, striking up collaborative agreements with other EU hauliers, or joining a road distribution network, would also assist the company in the future. Nevertheless, this deal is a step in the right direction for both parties involved as well as the logistics industry as a whole.
Rodney Hobson, editor of Hemscott.com, the financial information site of the Hemscott Group, says: "It's a very interesting deal in that Westbury is effectively ditching its property portfolio and Stobart is getting a listing. It seems to me this story is much more about Stobart than it is about Westbury. It is shunting into a listed company in order to get a listing which is a lot cheaper than a public flotation.
"I find it surprising that Westbury should want out of property - it has done well from it. WA Developments has bought up the bulk of Westbury's holdings and I think that's a smart move for them. Transport has been at the mercy of rising oil prices for years - who would want to move out of property and into transport? "However, commercial property prices may have peaked and there is fear of a bear market - this could be behind Westbury's thinking."