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October 31, 2016 3:30 AM, EDT

Trucking and Logistics Deals Anticipate Capacity Crunch

This story appears in the Oct. 31 print edition of Transport Topics.

Despite a current weak freight market, concern about future freight hauling capacity is leading to an increase in dealmaking among trucking and logistics service providers.

Last week, logistics and transportation service providers Sunteck Transport Group and TTS agreed to a merger that creates a company that would rank among the top 10 freight brokerage firms in the United States with annual gross revenue of about $900 million and the ability to handle more than 700,000 truck and rail shipments a year.

An executive at Odyssey Logistics & Technology Corp., based in Danbury, Connecticut, also disclosed the purchase of Linden Bulk Transportation, a tank truck carrier based in Linden, New Jersey. The move brings additional trucking and intermodal freight services to Odyssey’s portfolio of freight brokerage, warehousing and distribution services.

In addition, two investment firms also announced the purchase of controlling interest in Pilot Freight Services, an air cargo and package delivery company based in Lima, Pennsylvania, while Tailwind Capital acquired MetroGistics, a brokerage firm based in St. Louis, that specializes in arranging for transportation of new and used vehicles.

While these deals were unrelated, they all serve to illustrate underlying industry trends.

The Sunteck-TTS deal is the latest in a string of high-profile mergers and acquisitions involving freight brokerage firms. Other deals over the past year and a half have included the purchase of Coyote Logistics by UPS Inc., the merger of Command Transportation and Echo Global Logistics and the buyout of Freightquote.com by C.H. Robinson Worldwide, all of which were completed in 2015. Coyote ranks No. 5 on Transport Topics’ list of top freight brokerage firms, Echo ranks No. 4 and C.H. Robinson is No. 1.

TTS and Sunteck rank No. 22 and No. 24, respectively, on the freight brokerage list.

Under terms of the merger agreement, Sunteck/TTS will maintain separate offices with Ken Forster, CEO of Sunteck in Jacksonville, Florida, serving as president and CEO of the new enterprise and Andy Cole, CEO of TTS in Dallas, as chairman.

“The merger allows us to leverage best practices across our combined operations and provide optimal solutions for our agents and customers,” Forster said. “The resulting company and our agents will be well- positioned to lead the industry in serving shippers facing an increas- ingly complex regulatory, technological and economic environment.”

TTS’ Cole said shippers are concerned about truck capacity and want to do business with companies that can offer both asset-based and non-asset-based freight services.

“Customers are looking for balance,” Cole said in an interview with Transport Topics.

Truck capacity is expected to tighten after implementation of a law requiring all drivers to use electronic logging devices. The mandate will apply to most drivers starting in December 2017.

Sunteck and TTS together will be able to source capacity through a combined network of more than 200 agents and 30,000 motor carriers, Cole noted. Both companies also run their own trucking fleets with a combined total of about 1,200 owner- operators providing over-the-road truckload and local drayage hauling services. TTS also has a rail intermodal program with access to about 200,000 pieces of equipment.

Odyssey’s move is another indication of the willingness of logistics companies to own transportation assets as a way to ensure that shippers have access to hauling capacity.

“Acquiring Linden Bulk Transportation broadens our portfolio of services,” said Bob Shellman, CEO of Odyssey. “Combined with our existing intermodal chemical ISO tank and North America tank brokerage business, this strengthens our position as a leader in chemical transportation.”

Glenn Riggs, senior vice president of corporate logistics operations and strategy, said concern about driver availability is elevated among chemical shippers and carriers because those drivers require more training and are harder to recruit. In addition, demand for hazardous materials hauling is growing in response to an increase in petrochemical processing activity throughout North America.

“The North American chemical industry is growing because of fracking technology and the abundance of natural gas,” Riggs noted. “There is $160 billion in new projects under way in the United States.”

At Pilot Freight Services, CEO Richard Phillips Jr. said the sale of stock to ATL Partners and British Columbia Investment Management Corp. will help the company expand its service offerings in North America and Europe.

“Pilot has achieved significant growth over the past 45 years in an ever-changing logistics environment,” Phillips said. “As we pursue increasingly sophisticated opportunities, the Phillips family believes it is important for Pilot to work with experienced partners who can help us to continue to evolve and innovate to remain a best-in-class service provider to our customers.”

Jeff Calhoun, a partner at Tailwind Capital, said his firm’s investment in MetroGistics is also intended to bolster the company’s growth and capabilities.

MetroGistics provides load matching and delivery services for a variety of clients, including automotive manufacturers, rental car companies, dealerships and equipment leasing firms.