Heartland Express to Acquire CFI Truckload Business for $525 Million

Photos via CFI (left) and Heartland Express

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Heartland Express Inc. on Aug. 22 announced plans to acquire Contract Freighters’ nondedicated truckload business as well as Mexican entities under CFI Logistica in a $525 million deal.

The enterprise value of the transaction, which Heartland said is the largest it has ever done, is calculated on a cash-free and debt-free basis and is subject to certain adjustments. The deal is expected to close in the third quarter.

CFI is a wholly owned subsidiary of TFI International Inc. CFI will continue to operate under its own brand and with existing leadership from its current location in Joplin, Mo. The business consists of 2,000 tractors, 7,800 trailers and 2,800 employees. CFI Dedicated and CFI Logistics U.S. brokerage operations are not part of the transaction.

“CFI has exactly what we look for as we expand — significant scale, a respected and recognizable brand, capable management, safe and experienced drivers, a strong asset base and a complementary terminal network,” said Heartland Chairman and President Michael Gerdin. “CFI’s strengths in the north-south Midwestern corridor will add to our driver and customer capability, and their cross-border expertise will help us capitalize on the expected long-term freight volume benefits of nearshoring activity by manufacturers.”

TFI International


TFI International President Alain Bédard noted that the deal allows for his company to redeploy capital into its higher return businesses such as less-than-truckload, asset-light logistics and specialized truckload units. TFI has also maintained its full-year earnings per share estimates of $8.

“CFI is a great company, but the U.S. irregular route truckload business has become a small part of our portfolio,” Bédard said. “CFI’s people have been a small part of big companies for the past 15 years, and we wanted to find them a permanent home with a leader in the asset-based truckload industry to show what they can accomplish.”

Cowen and Co. noted the deal leaves TFI with only its dedicated business, which generated about $400 million in revenue for its trailing 12 months. The investment bank and financial services company updated its model accordingly but left its price target at $120.

“[TFI] left its full year EPS guidance unchanged at $8, suggesting continued strength across its business units,” Cowen analyst Jason Seidl wrote in a report. “[TFI] expects to reduce its leverage to 1.0x by year-end, down from 1.3x in the June quarter. This sale should give [TFI] more dry powder to make a larger acquisition in 2023 or 2024 as management alluded to during its Q2 earnings call. We see smaller tuck-in acquisitions likely before the end of this year as well.”


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JPMorgan Chase also updated its estimates and price targets to reflect the impact of the acquisition. The investment banking company sees that deal as a positive outcome for both companies. Heartland is positioned to be the most impacted, assuming solid execution.

“Heartland nearly doubled in size with a deal that isn’t a complete fixer-upper,” J.P. Morgan analyst Brian Ossenbeck wrote. “It also signifies a small step toward a more diversified revenue base that we’ve advocated for as a way to improve truckload carrier valuations while improving the ability to scale in tight freight markets. The divestiture is a long time coming for TFI, which recently separated these specific CFI assets from U.S. dedicated truckload operations in an effort to improve focus on over-the-road operations.”

Bank of America views the sale as consistent with TFI working to optimize its less-than-truckload business and reduce exposure to low-return, asset-intensive business. The financial services company noted that the purchase price equates to a 10.5 times trailing enterprise value to earnings before interest and taxes multiple.

“TFI previously noted that driver turnover for its OTR business was 85-90% (vs. 50-60% in dedicated) and that unseated tractors remained high at 11% of its fleet,” Bank of America analyst Ken Hoexter wrote. “In Q2, TFI moved its dedicated business out of CFI to its specialized truckload segment, isolating its OTR business, which it was working to integrate CFI with its TCA truckload asset.”


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Baird Equity Research said in a report that it likes the strategic fit and financial profile of the deal. The investment banking firm noted the deal is accretive and provides opportunity for growth as the industry outlook cyclically weakens. Its report also noted that the deal positions Heartland for improving profitability and enhanced growth potential long term.

“The CFI acquisition fits with HTLD’s core expertise in the dry-van contract freight market and follows a similar mold of recent Millis Transfer and Smith Transport acquisitions,” Garrett Holland, senior research analyst at Baird Equity Research, wrote in a report. “HTLD is deploying its balance sheet flexibility to increase scale at reasonable pricing, and we estimate earnings accretion may approach upper single-digits. Execution risk is higher, and the deteriorating industry outlook likely remains an overhang.”

Heartland Express ranks No. 66 on the Transport Topics Top 100 list of the largest for-hire carriers in North America. TFI International ranks No. 5.

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