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Analyst says increased pace of potential deals is a positive for the sector
Don’t look now, but there has been an explosion in merger and acquisition activity in the trucking industry in the fourth quarter. The fleets that shippers are using today might not be the names of the fleets hauling freight tomorrow.
The largest potential merger would be Phoenix-based Knight Transportation’s proposed $242 million takeover, including debt assumption, of financially ailing USA Truck. That initial overture was rejected by USA, although Knight is hinting it may proceed with a hostile takeover of the Van Buren, Ark.-based TL carrier.
But just in the first few days of the fourth quarter, there were these other trucking M&A developments:
-Toronto-based Vitran Corp. agreed to see its money-losing U.S. LTL operations to U.S. LTL entrepreneur Matthew Moroun for $2 million, plus debt assumption;
-Separately, TransForce is in talks to buy Vitran’s profitable Canadian LTL operations for $74 million;
-Jack Cooper Transport Co., the largest U.S. auto hauler, was given approval by a U.S. bankruptcy judge to buy Allied Systems Holdings, which used to be the largest U.S. auto hauler, for $135 million; and
-Phoenix-based third-party logistics provider Radiant Logistics bought On Time Express Inc., a time-critical domestic and international logistics company, for $20 million.
Of course, these deals occurred in the wake of the failed talks between YRC Worldwide, the nation’s second-largest LTL carrier, and ABF Freight System, the sixth-largest LTL carrier, last summer. There are rumblings those talks may not be completely dead and that parts of YRC’s regional operation might still be on the market.
David Ross, trucking analyst for Stifel Nicolaus, told LM that he views the increased pace of mergers and acquisitions in trucking as a positive sign for the highly fragmented trucking industry.
“Some companies have cash and/or borrowing availability on their balance sheet and are looking for growth that is not available organically in a lackluster freight market,” Ross explained. “So if they can find a company at a reasonable valuation, M&A makes sense for some.”
Ross said he believed industry consolidation should continue through M&A and carrier failures over the next year or so, although that might mean higher rates for shippers. “If trucking companies want to grow, it helps the pricing environment if they do so by buying existing capacity rather than by adding new trucks to their fleet,” said Ross. Read more
Source: LOGISTICS MANAGEMENT
