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Lineage Logistics Expands Global Cold-Storage Space with $900 Million Acquisition

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11/18/2019 | 02:45pm EST

By Jennifer Smith

Lineage Logistics LLC, the largest refrigerated-storage company in the world by space, is expanding in the Asia-Pacific region with a deal to buy upstart Emergent Cold from hedge fund Elliott Management Corp.

Lineage, whose customers include Walmart Inc., Tyson Foods Inc., General Mills Inc. and Sysco Corp., is paying more than $900 million for Emergent, in a deal being announced this week, according to a person familiar with the sale. The transaction would increase Lineage's global footprint by about 8%, to more than 1.7 billion cubic feet of capacity.

The acquisition, expected to close in 2020, comes as shifting consumer tastes toward fresh foods and the rapid growth in online grocery sales fuel more demand for refrigerated storage.

Investors are pushing more money into a market where low margins and the high costs of warehouse development have long deterred investment. The biggest companies in the fragmented sector are racing to expand domestically and overseas as demand for cold storage space outpaces supply.

Lineage, which is controlled by San Francisco-based Bay Grove Capital, has grown rapidly in recent years through a series of increasingly large acquisitions. This year, it bought U.S. rival Preferred Freezer Services LLC for more than $1 billion.

The Novi, Mich., company has made nearly 40 acquisitions since its 2008 founding, and moved into the international market in 2017 by buying Partner Logistics, a large European temperature-controlled storage provider with automation expertise.

This year, Americold Realty Trust -- No. 2 in the sector, according to the International Association of Refrigerated Warehouses -- spent $1.24 billion to acquire privately held Cloverleaf Cold Storage, officially known as Chiller Holdco LLC, which put its storage capacity at more than 1 billion cubic feet. Americold's share price has gained more than 39% over the past 12 months.

Lineage Chief Executive Greg Lehmkuhl said the bigger global network gives the provider an edge with food producers, manufacturers and retail customers looking to manage their supply chains across several regions.

"We can come in and say, 'Where should your warehouses be, where are your manufacturing plants now, how are you distributing to your customers?'" he said. "We can use our network and experience to optimize their food supply chain, and help them strategically position inventory."

Mr. Lehmkuhl said the company may consider an initial public stock offering as it seeks more backing for expansion efforts. "That's always an option for us in the future and we are working on IPO readiness in case," he said.

Emergent Cold was founded in 2017 and has since become the ninth-largest global cold-storage provider by space, according to IARW, with locations in Australia, New Zealand, Sri Lanka and Vietnam. Its chief executive, Neal Rider, is a former Americold executive.

Elliott Capital will maintain an equity stake in the combined entity, a person close to the deal said.

Buying Emergent adds to Lineage's regional properties in China and Vietnam and gives the company more capacity in a region where growing consumer buying power is fueling more demand for fresh food and temperature-controlled logistics.

The deal also brings Lineage a distribution center in the Dallas-Fort Worth area and port facilities in New Orleans, Houston and Charleston, S.C.

Write to Jennifer Smith at jennifer.smith@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
AMERICOLD REALTY TRUST -2.31% 33.06 Delayed Quote.29.44%
GENERAL MILLS, INC. -0.12% 51.6 Delayed Quote.32.51%
ZIONS BANCORPORATION, N.A. -1.27% 51.15 Delayed Quote.25.55%
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