CJ Group to Nurture Logistics Business, Cheiljedang as Future Growth Engines

Korea Express as a major growth engine

CJ Group took over Korea Express Co., the largest logistics firm in Korea, last year through a public bid under the group’s plan to make the logistics business its future growth engine, along with CJ GLS to lead the group’s future growth. Chairman Lee Jae-hyun revealed the group’s master plan at a declaration ceremony on March 12.
He said the group took over Korea Express under its 2020 Master Plan that came off the drawing board a long time ago. The group launched CJ GLS 15 years ago to make the logistics operation its main growth area in its business portfolio, the chairman said.
Under the master plan, the group will push the development of the logistics sector to the extent it would be among the top five global logistics concerns and ultimately the top logistics firm in the world, Lee said.
He continued that he will go for the development of the logistics business led by Korea Express to join the other sectors that made Korea a strong nation economically such as automobile, steel, electronics, and shipbuilding.
Korea Express has been on its way to expanding its global operations including stevedoring and home delivery service to become an integrated logistics company by taking advantage of its wholly-owned subsidiaries all over the world including China, Hong Kong, the United States, Vietnam, and Germany, among other countries to expand its home delivery operations globally. In the U.S., where it set up its home delivery service in 1974, the company now has some 200 home delivery handling offices. In addition, the company has agencies in many countries including Indonesia, Malaysia, Thailand, and Singapore in Southeast Asia, Australia and New Zealand in Oceania, as well as France and other countries in Europe.
The company also plans to develop various international logistics services with a focus on linking Japan, China, and Korea and inland networks in those countries. One such example is the RSR service between Korea and Japan, using rail, shipping or fast ferries and rail again in Japan.
Korea Express also plans to diversify into the transportation of heavy equipment as a new growth engine. The company won the rights to transport heavy nuclear power plant parts for Korea Electric Power Co., which won the rights to build a nuclear power plant in the United Arab Emirates.
By 2020, the group’s logistics sector’s annual turnover is projected to be around 25 trillion won with 1 trillion won in operating profit, meaning that annual sales should expand six times from the current figures. Annual sales are projected to amount to 8.6 trillion won in 2015, with 400 billion won in operating profit, and 13.4 trillion won in annual sales in 2017, with 580 billion won in operating profit.
In order to achieve the target, CJ Group might have to take over overseas logistic businesses through M&As, as the group needs a springboard to expand its logistics network in Southeast Asia to achieve its 2020 Master Plan
CJ Group was named the priority bidder for Korea Express Co. at a bidding held June 28, 2011, beating the consortium of POSCO-Samsung as announced by the Korea Development Bank, the lead manager of the bidding.
The lead manager said Daewoo Construction and Asiana Airlines, the sellers of majority shares of Korea Express, said they picked CJ Group based on bid papers it submitted on June 27. Sources said CJ outbid its rival by bidding more than 200,000 won per share against 190,000 won per share bid by its only rival.
CEO Lee Kwan-hoon said Korea Express will be a major vehicle for CJ Group’s logistics business sector during a media conference held in June at the Korea Journalism Foundation, and the group will consider further M&As overseas to pave the way for Korea Express to be a leading logistics firm globally.
According to the Ministry of Land Transport and Maritime Affairs, the value of the global logistics market is estimated at $2.725 billion, and the figure is predicted to surge at a rapid pace in the coming years thanks to a rise in cargo traffic volumes, led by the expansion of free trade agreements. Data Monitor predicted that the world logistics market will grow to $3 trillion by 2012.
Global logistics players are tightening monopolistic and oligopolistic control over the global logistics market through M&As of logistics firms and fortifying entry barriers. The global top 20 players, including Deutsche Post DHL, have a combined 80 percent of the global market.
Korean manufacturing companies will be encouraged to make inroads into overseas markets accompanied by logistics firms, and the government plans to provide such support as sharing information on overseas market entry to logistics firms and shippers who will join forces in exploring overseas markets.

CJ Group Chairman Lee Jae-hyun