February 28, 2018 9:00 AM, EST

Red Arts Capital Adds Central Arizona Freight to Holdings

Red Arts Capital, an Chicago-based investment firm launched a little more than two years ago, has added a second regional less-than-truckload carrier to its holdings with the purchase of Central Arizona Freight in Phoenix.

Terms of the transaction were not disclosed.

Red Arts Capital in 2016 acquired Brown Transfer Co., a family-run trucking company based in Kearney, Neb., and the only other business in its portfolio.

Central Arizona Freight founder Chuck Riser said he is pleased with the sale.

“The Brown and Red Arts teams share the same values that CAZF represents and are committed to offering quality service throughout the United States,” Riser said in a statement issued Feb. 22.

Launched in 1998, Central Arizona Freight provides LTL and pool distribution service for goods moving throughout Arizona, California, New Mexico and to and from El Paso, Texas. The company provides national freight service through interline arrangements with Southeastern Freight Lines in the South and Southeast, Dayton Freight Lines in the Midwest and Midwest Motor Express in the Rocky Mountain states.

Brown Transfer was founded in 1925 and is headed by Trevor Aden, the fourth generation of the Brown family to run the business. The company provides direct service to all points in Colorado, Nebraska and Missouri and elsewhere through partnerships with other carriers.

Brown Transfer has 122 tractors, 288 trailers and two straight trucks, according to registration data on file with the U.S. Department of Transportation.

Nick Antoine, a founding partner at Red Arts, said the CAZF deal is part of his firm’s strategy of investing in privately owned, multigenerational businesses with solid fundamentals and a strong track record and reputation in transportation, logistics and related industries.

“With the addition of CAZF, the Brown Transfer platform now provides one of the largest regional networks of premium LTL service in the Midwest,” Antoine said.

Antoine and partner Chad Strader started Red Arts Capital in late 2015 after each worked at other investment firms. Antoine served as special assistant to the chairman and CEO of Ariel Investments in Chicago and began his career as an equity research analyst for Princeton Global Asset Management. Strader worked at Woodlawn Partners and Entrepreneurial Capital Partners, where he served as chief financial officer for portfolio companies. He also held accounting and financial positions at PepsiCo and worked for his family’s automotive business.

In an interview with Transport Topics, Antoine said he and his partner are focused on investing in transportation and logistics companies, in part, because the industry is one that is “historically overlooked” by investors.

“We enjoy the industry,” Antoine said. “The people are down to earth.”

Antoine said LTL freight carriers, in particular, represent an opportunity for long-term investment.

“The competitive dynamics are unique,” Antoine said. “We found a great partner in Brown and there are a lot of family-owned business looking for an investment partner that can be a steward for their brand and company culture.”

Antoine said Red Arts Capital’s approach to investment will be similar to that of his business idol, Berkshire Hathaway Inc. CEO Warren Buffett.

“I’m a huge fan of Buffett,” Antoine said. “We’re not looking to buy and flip [companies]. We are taking a long-term approach.”

Antoine said the goal is to find more businesses like Brown and Central Arizona Freight, but his company will also evaluate businesses that provide warehousing and distribution, third-party logistics and supply chain-related services.

The company is also in the early stages of deciding how to proceed in terms of operational integration for other potential acquisition targets in the LTL sector.

For now, Brown and Central Arizona Freight will continue to operate separately under the same management team and with the same interline partners.

“The focus for both of these carriers is providing service in rural areas where there is not a lot of density,” Antoine said. “Our freight partners rely on that.”