MHS and Fortna to combine to form global e-commerce and logistics automation company

MHS Global (MHS), a leading global provider of material handling automation technology and systems integration, andFortna, a leading software and solutions provider for warehouse and distribution, will combine to form a multi-billion-dollar, multinational company providing parcel, warehouse and distribution, and lifecycle services, the companies jointly announced today.

The two companies—MHS and Fortna—belong to the investment portfolio of Thomas H. Lee Partners, L.P. (THL) a private equity firm investing in middle market growth companies.THLwill remain the majority owner of the combined company and a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA) will acquire a significant minority stake to support the combination.

As businesses increasingly require improved throughput and faster execution, there is heightened demand for automation, advanced operating software and services. The combination of MHS’s automation technologies and Fortna’s operational optimization software, in addition to each company’s deep industry partnerships, serves the need for end-to-end solutions in logistics operations. Customers will benefit from the breadth and depth of both companies’ offerings: industry-leading capabilities in parcel, cross-docking, conveyance, and sortation solutions combined with industry-leading orchestration and optimization software and unique operational designs leveraging advanced automation to drive greater efficiencies and cost savings for customers.

“MHS has built its reputation over the past 20-plus years by being a reliable and committed partner while expanding our capabilities and taking a progressive, tech-forward stance to deliver new products and solutions,” said MHS CEO Scott McReynolds. “Combining with Fortna will allow us to accelerate our collective efforts on all fronts, to the benefit of our customers, employees, and suppliers.”

Hamad Shahwan Al Dhaheri, Executive Director of the Private Equities Department at ADIA, said, “MHS and Fortna are leading players in their respective industries, and their combination will create a significant operating platform for the company to deliver automation solutions to customers on a global scale. This transaction aligns with our approach of making investments alongside proven partners in support of technology leadership.”

Jim Carlisle, Managing Director at THL and head of both Technology & Business Solutions and the THL Automation Fund, commented, “We look forward to working with the talented management teams and employees of Fortna and MHS as we continue to drive excellence in logistics automation. Automation solves industry-wide challenges, such as labor shortages, and helps customers meet escalating demand. These two companies are well positioned to meet these challenges and unlock new opportunities for their customers.”

Carlisle will serve as board chairman of the combined company. The transaction is subject to customary closing conditions and regulatory approvals. Terms of the transaction were not disclosed.

Rob McKeel, CEO of Fortna, in an interview withModern, explained the core advantage of the combination is that it creates the “scale” necessary to provide innovative solutions to companies globally who are looking to put in place more automation, while also using software to optimize operations.

“The combination will provide us with scale, and scale in two dimensions,” McKeel said. “One dimension is having the scale to handle the size of many of these projects and investments from clients, to meet the growing needs they have for logistics and distribution. We’re doing larger and larger projects, and there is more and more automation in those projects, so you need an integration partner that can scale to cover all those needs. And second, it’s scale in terms of our ability to invest in innovation, and to develop and apply advanced technology to solve the challenging problems that our clients are facing.”

Upon closing, McKeel will become the CEO, and McReynolds will become the President, of the combined entity. The name of the combined company has not yet been determined, McKeel added, though it is currently being studied. The regulatory closing processes will likely take about three months to conclude, he added, so the new name may not be announced until those approvals come through. The combined revenue of the company is not currently being named, though MHS is listed in现代的Top 20 list, which comes out each May.

McKeel also toldModernthat the combined entity will continue to invest heavily in advanced software capabilities, but that existing MHS and Fortna solutions in the warehouse execution system (WES) solution and warehouse control system (WCS) levels will remain supported. “Over time, we’ll bring some of [our software capabilities] together, and in a way that doesn’t leave any client behind,” said McKeel.

The combined entity will have a bigger customer base in Europe, McKeel added, which he sees as a plus for the combination. Other areas of synergy, McKeel added, come from MHS’s strengths in predictive analytics and uptime analysis, while Fortna has strengths around use of data science, modeling, inventory software, and WES-based warehouse orchestration.

According to aWall Street Journalarticle about the combination of MHS and Fortna, citing a source familiar with the matter, the merging carries a valuation of roughly $4 billion.

Morgan Stanley & Co. LLC and RBC Capital Markets, LLC served as financial advisors to MHS. Baird served as financial advisor to Fortna. Kirkland and Ellis served as legal advisor, respectively, to both companies. J.P. Morgan Securities, LLC will lead the debt financing for MHS. J.P. Morgan Securities, LLC and Gibson, Dunn & Crutcher LLP served as financial and legal advisors, respectively, to ADIA’s subsidiary.