The produce third-party logistics specialist is soliciting an additional partner to help support its geographic and service expansion.
Railex, the railroad transportation arm of produce wholesaler AMPCO Distribution Services Management, has hired investment bank Republic Partners to find a strategic partner or third-party investor that can help with the company’s planned expansion into Chicago and the southwestern United States, as well as intermodal services.
Railex, in business for a decade, runs refrigerated box car unit trains three times a week from Wallula, Wash. and Delano, Calif. to its distribution center in Rotterdam, N.Y. and its new facility in Jacksonville, Fla. The trains run on the Union Pacific network to Chicago, where they are interchanged to eastern railroad CSX.
The business was originally set up by owner Andy Pollack to move product by dedicated trains for AMPCO, which resells excess capacity to growers, other food distributors and retailers. Railex is essentially a rail forwarder that contracts with railroads for dedicated service to and from its cold storage facilities and provides truck pickup and delivery.
The company operates five warehouses totaling 1.2 million square feet, designed for rail and truck cross docking. According to a Republic sales sheet, Railex has more than 400 food, wine and beverage customers.
Similar to other intermodal marketing companies, Railex provides a package of logistics services, not just transportation. One of the service’s benefits is that the transport rate includes five days of free storage. Shippers can use a Railex facility to pre-position inventory and then pulse outbound deliveries based on market fluctuations or store needs rather than the truckload scenario of delivering upon arrival, giving cargo owners better control of their inventory from one centralized location.
By using Railex to store and ship product to their regional distribution centers on a just-in-time basis, grocery chains forego the need to build or lease their own cold storage facilities. Some distributors ship in greater quantities and make sales directly from the Railex facility to grocery customers.
Railex plans to build a consolidation/deconsolidation center in Chicago and is looking to expand into refrigerated intermodal transport, a niche sector that startup firm Tiger Cool Express has exploited to its advantage in the past two years, Railex Chief Financial Officer Joseph Leuci confirmed via e-mail.
Chicago is a central location for serving the large production and consumption market for agriculture and processed food products in the Midwest. Leuci also said Railex is considering expansion into the Southwest.
The intermodal service is expected to start this year, according to Ron Mui, managing director at Republic Partners.
Railex’s growth has been spurred by external customers. Originally, a third of the 3PL’s business came from sister companies, but now that figure is down to 7 percent, Mui said.
Railex’s net revenue was about $49 million in 2015, up from $42 million in 2012, and is projected to double by the end of 2018, according to the Republic sales sheet. The company lost $12.7 million on an EBITDA basis in 2014, but expects to be at $22.5 million on the positive side by 2018.
Railex goes into expansion mode, seeks investors
