YRC to Sell Majority Stake in Logistics Unit for $37 Million

This story appears in the July 5 print edition of Transport Topics.

YRC Worldwide Inc. continued its corporate makeover by agreeing to sell a majority interest in its logistics business to private equity firm Austin Ventures for $37 million.

The June 25 announcement said the current management of YRC Logistics will remain in place at a new company, with the seller remaining as an equity investor in the business.

After the Austin Ventures deal — which is expected to be completed in the next month — YRC’s remaining businesses will be its national and regional trucking units, its Glen Moore truckload service and its logistics business in China, which was excluded from the sale.

“This transaction enables YRC Worldwide to focus on our core transportation capabilities while continuing to offer full global logistics solutions for our customers through a strong business relationship with the new company,” said William Zollars, YRC’s chief executive officer.

“There will be no change in the way a customer’s business is handled, and they will benefit from advancements in the delivery of comprehensive supply chain solutions by both companies,” he added.

Late last year, YRC sold the dedicated contract carriage portion of its logistics business to Greatwide Logistics Services for $34 million.

YRC Logistics lost $4.5 million in 2009, and had revenue of $411 million, resulting in an operating ratio of 101.1 that was the best of any unit in the company.

YRC’s public relations agency did not respond to requests for information about how much of a stake YRC would retain in the new company. It also did not say what it would be called and whether YRC would have any level of control over its operations.

Under the terms of its credit agreements and reserve account in its revolving credit agreement, all of the money from the logistics sale must be used to repay YRC’s debt, which now totals $1.37 billion.

YRC will be allowed to use half of the sale proceeds to help fund day-to-day operations in exchange for agreeing to a reduction of future borrowing limits on its credit agreement.

“Cash is great, especially for YRC Worldwide,” said Credit Suisse analyst Chris Ceraso, who described the move as “an incremental, and short-term, positive for YRC.”

His investor report also noted that the company is still using more cash than it is generating but has slowed that pace modestly since the third quarter of 2009.

Financial performance at YRC’s logistics unit has been sinking in the past four years. In 2006, its operating income was $13.7 million and revenue was $609.7 million. Two years later, the business lost $149.9 million, including one-time charges on revenue of $621.7 million.

“The current YRC Logistics management team remains in place, and customers will experience the same expertise and accountability,” said John Carr, president of YRC Logistics. “The substantial equity infusion from Austin Ventures positions us to pursue new business development as well as growth through acquisition.”

The new company will focus on international freight forwarding, customs brokerage, transportation management, truckload services, and dedicated warehouse and fulfillment services in North America, Latin America, Europe and Asia, according to the statement.

“We are very pleased to partner with the management team of YRC Logistics. We see opportunities to invest in the company and position it for growth through expanded offerings and the continued expansion of its global network,” said David Lack, a partner at Austin Ventures.

The Austin, Texas-based company also has investments in other transportation-related companies, spokeswoman Kim Hughes said. They include Newgistics, a small package delivery business, and Port Logistics Group, a warehousing and distribution firm.

YRC’s announcement also said the company would enter a “comprehensive commercial services agreement” with Austin Ventures. Details were not disclosed.

The sale was announced four days before YRC’s June 29 annual meeting, at which six new directors were formally elected. Zollars and two others were holdovers.

The new directors include several financial experts backed by the company’s bondholders and one person nominated by the Teamsters union.

The new board members include Eugene Davis, Marnie Gordon, Beverly Goulet, Mark Holliday, John Lamar and Theresa Ghilarducci, who was the union’s nominee.