By Jennifer Smith

DSV Panalpina AS plans to buy the logistics division of Agility Public Warehousing Co. in an all-share deal with an enterprise value of $4.2 billion that would vault Denmark-based DSV into the top three global freight-forwarding companies.

The purchase of Kuwait-based Agility's Global Integrated Logistics unit, DSV's third major acquisition of a rival business in the past five years, would bolster its reach in the Asia-Pacific region and the Middle East. The transaction would give Agility an approximately 8% stake in DSV, making it the company's second-largest shareholder.

The deal is expected to close in the third quarter of 2021, and would increase DSV's annual revenue by an estimated 23%, to approximately 142 billion Danish kroner (equivalent to $23 billion), the company said Tuesday. It follows DSV's acquisition of Swiss logistics provider Panalpina Welttransport Holding in 2019, a deal with an enterprise value of about 5.4 billion Swiss francs (equivalent to $5.9 billion), DSV said when the transaction closed.

The GIL deal comes as the international freight industry is coping with surging volatility amid the pandemic and supply-chain disruptions such as the recent blockage of the Suez Canal. Tight air and ocean shipping capacity are putting a premium on the ability of big forwarders like DSV and rivals Kuehne + Nagel International AG and Geodis SA to find cargo space and keep goods moving.

Deutsche Post AG's DHL Supply Chain and Global Forwarding, Switzerland-based Kuehne + Nagel and Germany's DB Schenker are the world's three largest freight forwarders by 2019 gross revenue, according to industry analyst group Armstrong & Associates Inc., with DSV at No. 4.

The acquisition "was not driven from our side by capacity constraints," although it will increase DSV's buying power, Chief Executive Jens Bjørn Andersen said in an interview. "It was more a long-term industrial logic that made this happen."

DSV and its rivals have been pushing to expand market share in a highly fragmented global freight-forwarding industry. The company has moved up the ranks with the acquisitions of U.S.-based UTi Worldwide in 2016 and Panalpina three years later.

The GIL acquisition would give DSV between 4% to 5% of the market, Mr. Andersen said, with the integration expected to wrap up by the end of 2022. "We will continue to do M&A once this latest acquisition is, hopefully in all modesty and humbleness, integrated by the end of next year," he said.

Agility CEO Tarek Sultan in an interview said the company had been looking for a buyer or merger partner to help expand GIL.

The business operates in more than 100 countries and generated $4 billion in revenue last year, accounting for about 75% of Agility's total 2020 revenue. Mr. Sultan said Agility could cooperate with DSV on other parts of its business, including Agility Logistics Parks, its portfolio of industrial real estate in the Middle East, Africa and South Asia.

"Scale remains the key competitive advantage" of the deal, Jefferies analyst David Kerstens wrote in an April 27 research note. Based on DSV's earlier integrations of Panalpina and UTi, "we are confident DSV can lift Agility's (earnings before interest and taxes) margin from 3.2% to a level in line with DSV at 8.2%, creating substantial shareholder value."

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

(END) Dow Jones Newswires

04-27-21 1450ET