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May 26, 2017 10:00 PM, EDT

Hub Group to Acquire Estenson Logistics for $306 Million

Hub Group

Hub Group has reached a deal to acquire Estenson Logistics for $306 million, which, if approved, would combine the Nos. 28 and 46 companies, respectively, on the Transport Topics Top 50 list of the largest logistics companies in North America.

It also would marry together two asset-owning companies: Hub ranks No. 8 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers with nearly 3,000 company-owned and owner-operator tractors; and Estenson is ranks No. 14 on the sector list of the top dedicated contract carriers with 1,190 power units provided to shippers on an exclusive basis.

“Over the last two years, we’ve expressed our desire to make an acquisition in the dedicated space. Dedicated trucking is a service that is in demand for many of our customers, particularly the retail and consumer products companies that account for over 70% of our revenue,” said David Yeager, Hub Group CEO in a call with industry analysts. “Adding dedicated trucking will enable us to offer a more complete multimodal solution, which we believe will resonate with our customer base.”

Tim Estenson, founder and CEO of Estenson Logistics, will continue to lead the business and the 1,700 employees will be retained under the Hub umbrella.

“We built our company from the ground up and we are passionate about a superior customer experience and employee satisfaction,” Estenson said. “It was extremely important to me personally to find a home for us that shares those values. This is why we are extremely excited to be a part of the Hub Group family and I am looking forward to staying on board to see our company continue to flourish.”

Hub announced that the deal is expected to close by July 1. Once closed, the business will be renamed Hub Group Dedicated Services under the Hub Group trucking division.

The agreement also includes $6 million in earn-outs over the new two years tied to targets on earnings before interest, tax, depreciation and amortization.

“In our view, the transaction was well telegraphed and consistent with management’s disciplined approach to finding good strategic and cultural fits. Additionally, we believe the acquisition represents a complementary offering to the company’s existing intermodal, brokerage and logistics portfolio, in addition to diversifying away from core offerings. That said, dedicated represents a more capital-intensive business,” wrote KeyBanc Capital Markets analyst Todd Fowler, in a note to investors.