Logistics Consolidations Expand, Driven by Trend to Outsource

This story appears in the Feb. 25 print edition of Transport Topics.

Logistics businesses have combined at a brisk pace so far this year, with no less than 10 reported transactions as companies scoop up rivals, extend into new markets or change their corporate strategy altogether.

The deals so far include the combination of Greatwide Logistics Services’ dedicated contract business with Cardinal Logistics Management Inc. to create an $850 million company.

Greatwide, based in Dallas, ranks No. 21 on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada, and Cardinal, in Concord, N.C., ranks No. 32 on the TT Logistics 50.

John Larkin, a Stifel, Nicolaus & Co. analyst, tied the surge to market demand.

“Shippers continue the trend of outsourcing transportation and logistics services,” he wrote in a Feb. 15 investor note. “Third-party logisticians can often offer more market knowledge, better pricing, optimized supply chain alternatives and better systems — all relative to what can be mustered internally.”

“This transaction gives us a much bigger presence in the marketplace,” Jerry Bowman, president of Cardinal Logistics Management, told TT on Feb. 20. “This gives us the ability to provide a broader spectrum of services.”

Combining the Cardinal and Greatwide businesses is meant to capitalize on shippers’ increased interest in dedicated service, Bowman said.

“These were essentially two businesses in the same space,” said Bowman, who noted benefits from combining back office and information systems functions. “It made no sense to go to market with different companies.”

Greatwide’s truckload, less-than-truckload and warehousing operations will continue operating separately from the combined company, Bowman said.

Cardinal and Greatwide have been majority-owned by New York private equity firm Centerbridge Partners LP since mid-2012.

In another transaction, Toronto-based Vitran Inc. sold its logistics unit to Legacy Supply Chain Services, based in Portsmouth, N.H., for $97 million.

That sale enabled Vitran to focus on LTL service, which accounts for 85% of its revenue.

Richard Gaetz, CEO of Vitran, said the move “positioned Vitran to be a formidable LTL transportation provider in North America.”

Vitran ranks No. 34 on the for-hire TT 100.

But Nashua Motor Express Inc., a smaller New Hampshire company, went the other way.

On Jan. 31, the Nashua-based company stopped operating its trucking business after 92 years and became solely a third-party logistics operator, doing business as Nashua Logistics and Transportation Services LLC.

Elsewhere in New Hampshire, in the brokerage area, Walsh Transportation Group Inc. of Exeter was acquired by TTS LLC, based in Frisco, Texas.

Meanwhile, Greenwich, Conn.-based XPO Logistics Inc. paid $9.25 million for East Coast Air Charter Inc., based in Statesville, N.C. It is the fourth acquisition for investor Bradley Jacobs’ company in 18 months. It is expected to add $43 million in revenue.

“Brad Jacobs and his team want to get to a billion dollars in revenue in a relatively short term,” Evan Armstrong, president of Armstrong & Associates, told TT.

“They need to find the right acquisitions and get some pretty significant deal volume,” the logistics consultant and former industry executive added.

Armstrong and others ticked off a number of reasons for the recent spurt, particularly accessible capital.

“The availability of capital is definitely better than it was a year ago,” he said. “A lot of guys have been sitting on the sidelines holding onto cash. Now is the time to deploy it. If you want to grow beyond the average growth rate of 4-6%, a good way to do that is to make an acquisition.”

Larkin specifically cited the potential for warehousing companies to expand in a market where only the largest shippers can “run their supply chains as cost-effectively and as smoothly as can these third-party providers.”

In another deal, Algeco Scotsman of Baltimore paid $625 million for Target Logistics Management, based in Boston. The combined companies will provide housing in remote areas such as the North Dakota oil fields as well as related transport services.

“We believe the acquisition of Target Logistics and its high-quality, full-service product offering will help us accelerate our expansion,” said Jean-Marc Germain, CEO of Algeco Scotsman.

Other transactions announced this month span a variety of logistics services.

Storage firm Secor Group of Washington is combining with Special Products Transfer Inc., an office furniture moving company in nearby Lorton, Va.; and Canadian refrigerated warehouse operator Congebec Logistics Inc. of Quebec City, is merging with Westco MultiTemp Distribution Centres Inc. in Winnipeg, Manitoba. Also, Wauconda, Ill.-based Fidelitone Logistics’ merged with Purnell Furniture Services Inc., a home delivery company based in Manassas, Va. Terms for these deals were not disclosed.

Asked if the recent spurt will continue, Armstrong said, “There would be a lot more deals done if there were enough good companies to buy.”