Photo: DSV press materials

DSV establishes $10bn logistics joint venture with Saudi Sovereign Wealth Fund’s NEOM project

NEOM, owned by the Saudi Sovereign Wealth Fund, has announced together with DSV a whopping $10 billion logistics joint venture to support the development of NEOM projects. DSV says the partnership will focus on providing logistics services for NEOM in the coming years.

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Under the agreement, DSV will be responsible for the provision of end-to-end supply chain management, development and investments in transport and logistics assets and infrastructure, as well as transport and delivery of goods and materials within NEOM.

NEOM will hold 51% of the joint venture with DSV holding the remaining 49%.

Announced back in January 2019, the idea behind the NEOM project is to develop a new area in the Northwest of Saudi Arabia “equipped with all elements to make it the best place to live and work; and a leading investment destination”.

“NEOM will have new cities with extensive infrastructure that includes a network of airports, an advanced seaport, industrial areas, as well as creative and innovation centers to unlock the potential of a knowledge-based economy, and a range of world-class tourist destinations,” reads a fragment from the NEON project’s company formation announcement.

In the press release concerning the aforementioned joint-venture, NEOM said it envisions “unparalleled demand for construction logistics through to 31 December 2031, with sustained growth in non-construction logistics thereafter”.

Commenting on the joint-venture with DSV, Nadhmi Al-Nasr, CEO of NEOM, said:

“The projected demand in both construction and non-construction logistics will make NEOM one of the largest customers in the world, and this partnership allows NEOM to create value from its demand. Working alongside one of the world’s leading logistics companies, the joint venture with DSV will build on expertise and know-how to drive innovation and sustainability throughout the logistics value chain. The economic benefit to this partnership will not only provide tens of thousands of jobs, but it will also enable growth to capture local and regional market share. It’s a living example of Saudi Vision 2030 in action, fostering job creation and building a future-leaning economy.”

Jens Bjørn Andersen, Group CEO of DSV, added:

“NEOM is one of the largest and most complex projects in the world. It provides a unique opportunity for DSV to support a development that is at the forefront of innovation, technology and digital transformation. DSV already has a strong presence in Saudi Arabia, and this is a significant growth opportunity for us in the region and we look forward to working with NEOM Company and bringing our logistics capabilities to the table.”

Both parties have said they will also allocate a portion of the JV’s revenues to “foster the development of ground-breaking technologies and commercialise new sustainable next-generation logistics solutions”.

In part this will be achieved via the creation of a dedicated innovation centre at NEOM’s “clean and advanced manufacturing hub”, named Oxagon.

Completion of the partnership is awaiting customary regulatory approvals, which are expected to be obtained in the second quarter of 2024.

DSV also issued the following statement in relation to the financials of the joint venture:

“The business plan for the joint venture is expected to require a USD 10 billion gross investment. In accordance with the business plan, the total shareholder funding commitment up and until 31 December 2031 is USD 5 billion. NEOM and DSV commits to provide funding to realise the business plan pro rata to their respective shareholdings. It is expected that the return on invested capital be in line with DSV’s existing target. It is not expected that the joint venture will have any material financial impact on DSV for the financial year 2023,” said the Danish logistics giant.