Roadrunner Purchases Morgan Southern in Effort to Broaden Its Service Offerings

By Rip Watson, Senior Reporter

This story appears in the Feb. 14 print edition of Transport Topics.

In a move to broaden its service offerings, Roadrunner Transportation Systems Inc. has made what’s believed to be the first purchase of an intermodal drayage fleet by a primarily less-than-truckload carrier.

Roadrunner, Cudahy, Wis., announced the $20 million purchase of Morgan Southern Inc., Conley, Ga., on Feb. 3.

“We think intermodal is going to grow, and that growth is going to continue over the next several years,” Mark DiBlasi, CEO of RoadRunner, told Transport Topics on Feb. 8. “It’s very important to have an intermodal presence.”

Roadrunner developed truckload and freight management services before becoming publicly traded last year. DiBlasi said he was unaware of any pure LTL operator that has acquired a drayage company.

Less-than-truckload services generated 64% of Roadrunner’s revenue in the fourth quarter, as sales rose 29% to $105.1 million and profits more than doubled in that unit. Truckload revenue grew 28% to $43.8 million and freight management revenue climbed 40% to $17.7 million.

Roadrunner’s acquisition comes as intermodal freight grew at the fastest rate in nearly three decades last year, the Intermodal Association of North America reported on Feb. 8.

Other LTL operators such as ABF Freight System already have intermodal offerings, focused on longhaul moves of their LTL freight. Averitt Express offers intermodal drayage. Earlier this year, FedEx Freight became the latest large LTL carrier to embrace intermodal.

Drayage is a $4 billion annual revenue market dominated by smaller, privately held companies, DiBlasi said. One indication of that fact is that IANA counts more than 400 companies in its trucking division.

The latest purchase of a drayage carrier by a publicly traded company was intermodal marketer Hub Group Inc.’s 2006 acquisition of drayage carrier Comtrak Logistics.

The only drayage carriers on the Transport Topics 100 list of the largest for-hire carriers in the United States and Canada are RoadLink USA at No. 55 and Bridge Terminal Transport at No. 79. Roadrunner is at No. 47 on TT’s list.

Morgan operates 19 U.S. terminals and had revenue of $57 million last year. Its 2010 pretax profit totaled $3.4 million last year, running a fleet of 400 tractors.

DiBlasi emphasized the synergy between Roadrunner and Morgan Southern, which will allow his company’s 100-member sales force to offer intermodal drayage as well as its other services.

“Very few customers only want one service,” he said. “The more services that you can offer, the more customers are going to utilize your service.”

In the announcement, Roadrunner said Ben Kirkland will remain as president at Morgan Southern and lead its operations, as he has since 1996.

About two thirds of Morgan Southern’s drivers are independent contractors. Approximately 80% of its revenue is from intermodal drayage.

The independent-contractor approach fits with RoadRunner’s dependence on owner-operators and purchased transportation for its longhaul service.

“Through our due diligence, we found that they have a high-quality workforce and a great reputation,” DiBlasi said. “A lot of drayage carriers don’t have a great reputation.”