Trailer maker Wabash National Corp. has reached an agreement to acquire truck-body manufacturer Supreme Industries, a move that would catapult Wabash to the second-largest U.S. truck-body manufacturer as it expands its focus on e-commerce equipment.
Wabash announced Aug. 8 a cash tender offer for $21 per share, which represents an equity value of $364 million and an enterprise value of $342 million for Supreme.
Founded in 1974, Supreme is the second-largest U.S. manufacturer of truck bodies, with 2016 sales of $299 million, according to Lafayette, Ind.-based Wabash. Supreme, based in Goshen, Ind., primarily manufactures light- and medium-duty truck bodies at seven factories across the United States.
One analyst, responding to the news, was supportive.
“Our initial thoughts are mildly positive on the deal as it 1) further diversifies Wabash away from the 53-foot dry-van trailer industry, 2) will be accretive to earnings and 3) should not be viewed as a ‘bet-the-farm transaction,’ ” analyst Brad Delco with Stephens Inc. wrote in a note to investors.
With the acquisition completed, Wabash would trail only Morgan Corp. in the truck body manufacturing industry, Delco told Transport Topics. “Supreme has about 17% share of the market, whereas Morgan has about 40%. No other trailer manufacturer will have as much exposure to the truck body, final-mile e-commerce market as WNC, though, to say it differently.”
“Wabash National has been closely monitoring the transportation landscape as the growth of e-commerce has continued to change the logistics model,” Wabash CEO Dick Giromini said in a statement. “We formally entered the final-mile space in 2015 with the launch of our dry and refrigerated truck bodies, and we have been aggressively growing our presence and product offering over the past two years. This acquisition supports these efforts and accelerates our objective to transform our business into a more diversified industrial manufacturer.”
Once the transaction is complete, Wabash would see its revenue from dry van semi-trailer manufacturing fall to “an expected” 50% in 2018, compared with 64% in 2016,” Stifel, Nicolaus & Co. analyst Michael Baudendistel wrote in a note to investors.
Wabash expects to deliver at least $20 million in annual run-rate cost synergies by 2021, primarily driven by corporate and procurement expenditures, and operational improvement savings, according to the company. Over time, Wabash expects to achieve significant incremental revenue opportunities that neither company could obtain on a stand-alone basis, but it did not elaborate in its statement.
“This is a great opportunity for both companies to combine our strengths to provide an enhanced customer experience within the growing final-mile delivery space,” Giromini added. “With Supreme, not only can Wabash National accelerate organic growth with our innovative DuraPlate, honeycomb panel and molded structural composite truck bodies, we can also provide a broader conventional product offering to our existing customer base.”
The merger, when approved, will enhance Supreme’s ability to “innovate more quickly and create more value for customers,” Supreme Industries CEO Mark Weber said in a statement. “We found a cultural fit with Wabash National. Because of their commitment to safety, innovation and customer relationships, I’m confident joining the Wabash National family will benefit our employees, customers and distributors.”
Trailer maker Great Dane also owns Johnson Refrigerated Truck Bodies, which makes bodies for medium-duty trucks carrying temperature-sensitive products, including for home delivery, Great Dane said on its website, and the equipment is available through authorized Great Dane branches and select dealerships.