Hub Group to Acquire Retail Consolidation Specialist CaseStack
Hub Group has agreed to acquire CaseStack Inc. for $255 million as part of a strategy to expand and diversify its transportation service offerings.
CaseStack provides freight consolidation for companies that sell consumer packaged goods to large retailers, such as Walmart, Kroger and Amazon.com. The company also provides warehousing and less-than-truckload freight brokerage services.
CaseStack generated operating profits of about $22 million on revenue of about $242 million in the 12 months ended Sept. 30, according to a statement released by Oak Brook, Ill.-based Hub Group on Nov. 5.
“We are very impressed with the business that the CaseStack management team has built,” Hub Group CEO Dave Yeager said. “We believe there will be significant opportunities to enhance network optimization with our customers.”
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CaseStack founder and CEO Dan Sanker said the companies are a good fit.
“Our core values, including collaboration, determination and excellence, are aligned,” he said. “We are thrilled that Hub will sponsor our growth by introducing new customers and enhancing our services with assets, drivers and technology.”
Sanker is a former executive at Procter & Gamble who left a job at Deloitte to start a technology consulting firm out of his home in Santa Monica, Calif., in 1999.
The company soon focused on developing software and systems to help major retailers collaborate more effectively with their trading partners.
With backing from a number of private equity investment firms, including Blumberg Capital, Clarity Partners and Garage Technology Ventures, CaseStack developed a proprietary service platform for collaborative retailer consolidation programs and has become the biggest player in that market.
In addition to its headquarters in Santa Monica, CaseStack maintains a brokerage office in Fayetteville, Ark., and occupies about 3 million square feet of space in warehouses in Seattle, Los Angeles, Dallas, Chicago, Atlanta, Scranton, Pa., and Toronto.
Hub Group’s Yeager said demand for consolidation services is growing because major retailers are setting increasingly stringent delivery requirements that include penalties for missed or late deliveries. CaseStack combines shipments from multiple suppliers into full trailer loads and then orchestrates the movement of those loads directly into retail distribution centers.
To learn more, please visit @HubGroup: https://t.co/x3tFTIZZ7Y pic.twitter.com/63k11XERlC — CaseStack (@CaseStack) November 5, 2018
“Retailers have become much more sophisticated on inbound transportation,” Yeager said in a conference call with investment analysts after the acquisition announcement. CaseStack’s consolidation service helps small and midsize suppliers achieve compliance with on-time delivery requirements and save money by converting less-than-truckload shipments into full trailer loads.
About two-thirds of CaseStack consolidation business is related to food and beverage shipments and about 7% is related to health and beauty products, Yeager said.
Sanker estimates that, on average, CPG companies give back 1% of their revenue in penalties due to missed or late deliveries. And it’s a problem likely to persist as e-commerce pressures retailers to offer a larger array of products requiring smaller, more frequent deliveries.
“At a minimum, it’s confusing,” Sanker said of the increasingly strict shipping requirements. “The rules keep changing.”
Hub Group expects the transaction to officially close by early December, and Yeager said he expects the deal to be accretive to earnings in 2019.
Hub Group ranks No. 8 on the Transport Topics Top 100 list of largest for-hire carriers in North America and No. 2 on the TT list of largest carriers in the intermodal/drayage sector.
Last year, Hub Group expanded into dedicated trucking services with the purchase of Estenson Logistics.
The company also ranks No. 33 on the Transport Topics Top 50 list of largest logistics companies in North America.
In September, Hub Group sold Mode Transportation, a multimodal freight brokerage business unit, to York Capital Management for $238.5 million.