CEO: Transplace sale sets stage for acquisition strategy
Non-asset based logistics provider Transplace plans to use its new deep pockets to aggressively pursue acquisitions of other freight service providers for the first time, CEO Tom Sanderson said.
The Plano, Texas-based company announced Tuesday that its four trucking industry investors had sold the company to an affiliate of private equity investment firm CI Capital Partners for an undisclosed amount.
Transplace was jointly founded in 2000 by the six largest publicly traded U.S. truckload carriers to combine their logistics operations into an Internet-based company that coordinates the management and execution of domestic freight shipments. An independent company, Transplace had at its disposal the trucking fleets, terminals and other assets of its owners, as well-as non-affiliated carriers, to handle customer requirements.
The four remaining owners were Swift Transportation (which previously acquired one of the other carriers), Covenant Transportation Group, U.S. Xpress Enterprises and J.B. Hunt Transport Services. They will continue to be part of Transplace’s carrier network.
There have been few mergers and acquisitions in the logistics market during the past 18 months, especially from private equity firms, as the financial crisis made it difficult to borrow money and operating companies conserved cash to focus on survival. Investors also pulled back because the supply of attractive companies that could provide strong returns dried up during the current economic crisis.
Sanderson said the down economic climate is a good time to be an asset buyer and that after nine years of purely organic growth the company is ready to go on the acquisition trail.
'We think it's a good opportunity for Transplace to do acquisitions to expand our portfolio and scale' to be able to offer new services and greater industry or geographic diversification, he said in a telephone interview. The plan is to buy other non-asset based businesses and apply its extensive technology platform to their operations. He mentioned cross-border transportation providers as a prime area of interest.
Transplace offers a blended product to shippers who can use its proprietary transportation management system to manage their own carrier selection and shipment planning or outsource logistics management to Transplace. Its automated systems allow it to optimize and combine freight moves via truckload, less-than-truckload and intermodal carriers. Other services include supply chain network planning and brokerage services. Among its customers are Home Depot, Pep Boys, Autozone and Pace Industries.
George Abernathy, the company's chief operating officer, said CI Capital Partners will also provide capital to expand ongoing initiatives, such as the company's 21-month old subsidiary in Mexico and its ocean freight forwarding business arranging imports and exports on behalf of shippers. A bigger pocketbook will also allow the third-party logistics provider to do more marketing, he added.
Transplace, which has focused on serving the Fortune 500 market, in March will launch a new set of freight management services tailored to smaller shippers, Sanderson said.
“The market for outsourced transportation is very large and fragmented, and we believe Transplace is well positioned to continue to expand its 3PL and freight brokerage businesses organically as well as through strategic acquisitions,” Joost Thesseling, principal at CI Capital Partners, said in a statement.
Transplace was purely a financial investment for the original owners and they decided to sell the company when a reasonable offer came in, Sanderson said. There is little competition between Transplace and the logistics arms of the four trucking companies, which primarily operate dedicated fleet operations and truck brokerage, and the minor overlap in matching available trucks and freight was not much of a factor in the sale, he said.
The 3PL increased its value this year and attracted an offer because its net revenue has grown almost 10 percent during tough economic times, Sanderson said.
The non-asset based company is a mid-tier logistics provider in terms of revenue, but ranks in the top 10 as far as truck brokerage. In 2008, it had net revenue of $70 million, according to annual industry research by Transport Topics, on gross revenue of $975 million moving all types of freight. The logistics provider, which doesn't publicly disclose its net revenue, said it generated more than $700 million in gross revenue this year. Sanderson attributed the difference to a large reduction in fuel surcharge collections after diesel fuel prices returned to more sustainable levels midway through last year. The company expects to grow net revenue by 15 percent in 2010, he said.
CI Capital Partners is a New York investment firm that owns companies that provide home maintenance, health care, national security services, a safety products distributor and a contract manufacturer of consumer goods. Sanderson, who along with Abernathy and other top managers became a part owner in the company, said CI required no outside financing to consummate the deal. ' Eric Kulisch