Two Major Deals Mark Consolidation Trend; Heartland Buys IDC, Daseke Gets Steelman Cos.
Two major truckload carriers have announced purchases, and one of the transactions will unite companies ranked among the Transport Topics Top 100 list of the largest North American for-hire carriers: Heartland Express and Interstate Distributor Co.
Heartland said on July 6 that it will pay $113 million for Interstate Distributor. Of that amount, $94 million will go to Saltchuk Resources Inc., parent of Tacoma, Wash.-based Interstate Distributor since 2012, and $19 million is for the assumption of IDC’s debt.
“With a strong operating base and confidence in the future, we have been carefully evaluating several acquisition candidates and ranked IDC at the top because of the direct path to achieving synergies,” said Michael Gerdin, CEO of North Liberty, Iowa-based Heartland. “Additionally, IDC is an excellent operational fit, as its terminal network has nearly direct overlap with our current locations.”
Heartland and Interstate Distributor rank Nos. 41 and 67, respectively, on the for-hire TT100.
Truck PR/Flickr (inset of Daseke via Daseke Inc.)
The second transaction, announced on July 5, is open-platform and specialized group Daseke Inc.’s acquisition of The Steelman Cos. Terms were not disclosed. It will be Daseke’s 12th operating company and its third addition since going public in February.
“A key objective of our decision to go public in February was to enhance our ability to build North America’s premier flatbed and specialized transportation company,” said Don Daseke, president and CEO of Addison, Texas-based Daseke.
The Steelman Cos., which is based in Springfield, Mo., specializes in flatbed and heavy-haul freight as well as in industrial warehousing. Daseke’s other two deals this year, announced in May, were for the Schilli Cos. of Remington, Ind., and for Big Freight Systems of Winnipeg, Manitoba — Daseke’s first foray into Canada.
While Daseke didn’t break out purchase prices individually, it paid a total of about $105 million for the three transactions.
“The total consideration given was a mix of three things: (1) cash (2) Daseke stock and (3) assumption of debt. The mix of these three components will vary deal by deal and are very specific to the situations of the individual companies joining us,” Daseke Chief Financial Officer Scott Wheeler told Transport Topics.
The Heartland acquisition expands its available assets in dry and refrigerated van truckload, dedicated contract carriage and the freight brokerage business. It will gain additional traffic density in the West and expects its stronger eastern network to improve service for IDC.
Heartland and IDC’s 2016 results combine for a carrier with $983.1 million in annual revenue — a bit more than Forward Air Corp. with $982.5 million last year. (IDC recorded an operating loss in 2016 and likely will also lose money in the first six months of this year once financial results are complete, Heartland revealed.) Based on expected synergies, the transaction is expected to be accretive to Heartland’s earnings in the first full quarter of operations,” Heartland said.
“Although investors might be a little apprehensive about this deal given the less-than-expected returns with the Gordon acquisition, our sense is that management learned from these integration issues and would be very prudent about making any future acquisitions,” Stephens Inc. analyst Brad Delco wrote in an investors note.
Heartland acquired Gordon Trucking in November 2013 for $300 million.
Heartland discussed the deal in a July 7 conference call, after press time for this edition.
Heartland expects to integrate IDC into Heartland’s existing operations and operate under the Heartland brand once the deal is closed.
“The overlapping Heartland and IDC locations largely will be consolidated over the next 18 months,” Heartland said. “Numerous IDC drop yards will no longer be needed, as Heartland has a footprint of 21 terminal locations across the U.S. that will be utilized along with numerous drop locations.”
Daseke’s strategy is to recruit well-run, open-platform and specialized carriers to merger into its roup. The Steelman brand will be maintained, as Daseke has done with its 11 other merger companies.
Jerry Steelman founded the company in 1991. In 1998 he sold it to Jim Towery and Brett Sheets, who will remain with Steelman as the company’s president and vice president, respectively.
Steelman has 110 trucks and 180 trailers, giving Daske a combined fleet of 3,600 tractors and 7,500 flatbed and other trailers.
Wheeler said during the call that Daseke companies now have about 1.2 million square feet of warehouse space for “really big, heavy industrial output.”