"It is the step change we have been seeking," says chief executive of Menzies Transport Services, Peter Smith. Since he started building up the aviation services side of Menzies in 1995, Smith has seen turnover rise fourfold from £25 million per year to £100 million by 2000. The addition of the ground handling operations of Ogden will boost this to £250 million per year, he says.
"About five years ago the John Menzies board decided ground handling was a sector it wanted to develop. It is an industry with high growth rates and one that is opening up and re-structuring."
Over the past two years there have been several major acquisitions in the ground handling field, with the UK's Servisair bought by Penauille of France, Lufthansa subsidiary GlobeGround buying US-based Hudson General, and SAir daughter Swissport International buying another US player, Dynair. Menzies was advised by Dresdner Kleinwort Benson on the acquisition of Odgen.
Menzies, better known in the UK for its newspaper and retail businesses, has emerged from the background into a global player with the Odgen buy.
"It is a quantum leap for Menzies in terms of geographical coverage," says Iain Macarthur, investment analyst at Bell Lawrie White. Previously, it was mainly active in the UK and Australia. Odgen's handling network has a major presence in North and Latin America, Europe and the Asia-Pacific.
With Ogden, Menzies now has operations at 70 airports. Swissport, GlobeGround, Worldwide Flight Services and Servisair have operations at between 80 and 100 airports each.
The deal with Menzies ends an 18 month search by Ogden and its advisors Goldman Sachs for a buyer. During this time, Peter Smith recognises that image Ogden's image suffered, and that it lost market share at several airports and even pulled out of some.
However, while Ogden has a mixed reputation in Europe, it is regarded as a "perfectly adequate partner" in the Americas and the Asia-Pacific, he says.
"Any business up for sale suffers a period of uncertainty, but Ogden is a profitable business today and we see some gems in it as well."
Smith's short-term goals are to successfully merge the businesses and get the full value out of the price paid. Then he will move to develop the extensive range of support services Menzies has created at its UK operations to the Ogden network, and to keep focusing on cargo expansion where the two companies have strong positions.
In addition, Menzies will add to its number of locations on a sensible basis, he says.
The possibility of another, even bigger, piece of industry re-structuring could also involve Menzies.
In the UK, Menzies and GlobeGround have merged their cargo businesses, forming Menzies World Cargo, and both parties expect their partnership to develop further. "We are only co-operating in the UK at present, but it is a very good joint venture, and we want our GlobeGround relationship to evolve," says Smith.
Smith says he also expects the relationship to develop.
| Major players in ground handling | |||
| Supplier | Number of Airports | Countries | Employees |
| Swissport | 115 | 20 | 15,000 |
| Menzies/Ogden | 72 | 22 | 9,000 |
| GlobeGround | 85 | 23 | 17,000 |
| Worldwide Flight Services | 97 | 12 | |
| Servisair | 99 | 11 | 10,000 |
Source: Airline Business
