Retail Tech M&A #3: Amazon leads race to build fulfillment centers

fulfillmentcenterillustration

Demand for faster shipping is driving the need for more fulfillment centers, as we discover in the third part of Mergers & Acquistions’ 7-part series, Retail Tech M&A. Here's our look at modern warehouses, which fill orders quickly.

Filling orders faster
Online retailers, including Amazon.com Inc. (Nasdaq: AMZN), are adding more fulfillment centers to meet consumer demands for faster shipping. More local fulfillment centers mean faster delivery times and lower last-mile costs, or costs for the last legs of deliveries for both retailers and customers. The owners of these sites, along with the contractors that build the centers, are becoming prime M&A targets.

Blackstone
Blackstone Group Inc. (NYSE: BX) is a buyer of logistics real estate. The private equity firm announced plans to buy Colony Industrial, the warehouse arm of real estate investment firm Colony Capital Inc. (NYSE: CLNY), for $5.9 billion. The unit’s properties mostly serve as the last mile stop and are crucial for companies seeking to make rapid deliveries to consumers.

The deal by Blackstone, one of the world’s biggest property investors, comes at a time when it is spending billions of dollars to snap up logistics assets as a surge in e-commerce activity spurs demand for delivery and warehouse services.

Blackstone paid $18.7 billion for the U.S. logistics assets from three of the U.S. funds of GLP, a logistics-focused investment firm, in what the companies called the largest private real estate transaction globally.

“These properties are a complementary addition to our stabilized commercial real estate portfolio, which is oriented toward our highest conviction themes, such as logistics,” says Frank Cohen, CEO of Blackstone REIT.

Sterling Construction
Public works builder Sterling Construction Co. (Nasdaq: STRL) bought Plateau Excavation Inc. for $400 million. Plateau serves customers in the e-commerce and warehousing sectors with infrastructure and excavating contracting services.

Plateau’s recent and current construction projects include: an Amazon fulfillment center in Alabama, a Walmart Inc. (NYSE: WMT) distribution center in Florida and a UPS (NYSE: UPS) warehouse at Charlie Brown Field in Atlanta.

“The rapid growth in e-commerce and cloud computing, and the continuing rise of internet activities, makes Plateau-- a company that specializes in data center and warehouse construction-- a very attractive addition to Sterling’s portfolio of businesses,” says Joe Cutillo, Sterling CEO.

Alibaba
Alibaba Group Holding Ltd. will spend $3.3 billion to raise its stake in Cainiao, in an effort to exert more control over the logistics subsidiary that underpins its sprawling e-commerce empire. Cainiao is the rapidly growing business that sits at the heart of Alibaba’s expansion, both in China and abroad. It oversees a coterie of at least a dozen shipping partners, orchestrating deliveries carried out by millions of people across the country.

With the holiday shopping season in full swing, all eyes are on the retail industry, which is undergoing transformational changes. Mergers & Acquisitions' series examines the impact of 7 technologies on M&A in the retail sector. Read the whole series:

Retail Tech M&A #1: Nike, McDonald's, PayPal, add customization, IoT
Retail Tech M&A #2: Why Walmart and other retailers are buying artificial intelligence startups
Retail Tech M&A #3: Amazon leads race to build fulfillment centers
Retail Tech M&A #4: Do robots fill orders faster?
Retail Tech M&A #5: Voice recognition gives retailers more ways to communicate
Retail Tech M&A #6: Data improves customer service
Retail Tech M&A #7: Demand for convenience drives growth in mobile ordering

We'll continue watching how these technologies and trends play out in the M&A in the new year.

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