Trucking Acquisitions Likely to Continue at Strong Pace in 2014, Executives Say

This story appears in the Feb. 24 print edition of Transport Topics.

MANALAPAN, Fla. — Trucking industry acquisitions will continue in 2014 at the stepped-up pace that was seen last year, eight industry leaders said.

Those speakers at the Stifel Nicolaus conference here on Feb. 11-12 included potential buyers CRST International and Knight Transportation. In addition, active buyers such as Roadrunner Transport Systems and Celadon Group emphasized additional acquisitions.

“We have $300 million gathering dust,” to back acquisitions, said David Jackson, president of Knight Transportation, referring to available cash and credit sources.

“We have been a little public in our effort,” said Jackson, whose company last year tried to buy. “That has sparked a lot of interest. There might be a line of buyers out there. There may be a window of opportunity for someone to sell.”

Last year’s high-profile acquisitions included Heartland Express buying Gordon Trucking Inc.

Knight ranks No. 31 on the Transport Topics list of the 100 largest U.S. and Canadian for-hire carriers. USA Truck is No. 52, on the for-hire list, while Heartland is No. 47 and Gordon Trucking is No. 61.

Other prominent deals were No. 7 Swift Transportation acquiring No. 56 Central Refrigerated Service, and car hauler Jack Cooper — No. 53 on the TT for-hire list — purchasing Allied Systems Holdings. Meanwhile, No. 44 Celadon bought a total of 17 companies in the last two years, while Roadrunner, No. 24, made six acquisitions in 2013.

“We are actively looking at acquisitions,” said John Smith, chairman of CRST International, No. 20 on the TT for-hire list. “If you want to grow . . . right now, I don’t see any way of growing other than acquisitions. There will be more consolidation.”

At the same time, Smith said, the truckload business can’t consolidate in the same way that railroads or LTL carriers can. In those sectors, a handful of companies control the majority of business.

Smith explained that there are a number of smaller truckload fleets whose lower costs will enable them to stay in business.

The top 10 truckload fleets have just 7% of the market, said Richard Stocking, CEO of Swift.

Stocking said, “We are always looking at acquisitions that might help us,” as Swift also evaluates opportunities to convert private fleets’ business to the for-hire industry.

Celadon CEO Paul Will told conference attendees that the company’s focus now is on Canadian acquisitions because “there are good business opportunities there.”

Cross-border business with Canada and Mexico accounts for more than half of Celadon’s freight.

On a broader scale, Will said, “there is a lot more consolidation coming. Many small companies are under stress.”

“Fragmented industry sectors will continue to consolidate,” Stifel Nicolaus analyst John Larkin told TT, citing truckload and brokerage.

“Economies of purchasing scale, federal safety, fuel efficiency, emissions regulations, and the evolution of modern transportation management systems have combined to make it difficult for many smaller players to survive, much less prosper,” Larkin said.

Roadrunner, which has made 20 acquisitions since 2010, intends to keep up that pace, CEO Mark DiBlasi said, with a focus on the international sector to complement a 2013 deal for Marisol International.

He said the company “has imminent acquisitions in the pipeline,” subject to satisfactory due-diligence reviews.

XPO Logistics, which ranks No. 45 on the Transport Topics list of the 50 largest U.S. and Canadian logistics companies, is continuing on a long-term acquisition path that began in 2011. Those acquisitions included four purchases last year as well as January’s announced deal to buy Pacer International.

CEO Bradley Jacobs said the company has a “robust acquisition pipeline.”

Others also indicated that they are on the lookout for acquisitions.

At Hub Group, President Mark Yeager said the intermodal and logistics operator that ranks No. 29 on the TT Logistics 50 list is “willing to leverage the balance sheet for the right opportunity.”

In addition, Butch Bingham of Bulkmatic said, “We see real consolidation coming” in the carrier’s bulk trucking industry. “Companies are going to get a lot bigger” as banks make more financing available to back purchases.

Four other executives who spoke at the meeting indicated their companies were not focused on acquisitions now, for several reasons.

Chairman Vin McLoughlin of Cardinal Logistics, No. 34 on the TT for-hire list, said his company is still concentrating on the successful integration of last year’s Greatwide Logistics acquisition, which has to be completed first, in light of other companies’ past experience.

The reason, he explained, is that “the larger merger integration field is strewn with bloody, charred bodies.”

Billy Hupp, chief operating officer at Estes Express, which ranks No. 15 on the for-hire list, said his less-than-truckload carrier isn’t pursuing acquisitions in the industry because of the difficulty in successfully combining LTL fleets.

CEO Chad England of C.R. England said his company “has zero interest in asset-based acquisitions. We do that [growth] organically.”

England said that the carrier, No. 19 on the for-hire list, hires 200 new drivers a week.

David Parker of No. 41, Covenant Transportation Group, said fleets remain “very cautious” about acquisitions because of the difficulty in finding drivers.