Schneider (NYSE: SNDR) announced Tuesday it has acquired dedicated truckload carrier Midwest Logistics Systems (MLS) at an enterprise value of approximately $263 million.
Ohio-based MLS operates a fleet of 900 tractors throughout 30 central U.S. locations. The company generated $205 million in annual revenue ($170 million excluding fuel surcharges) for the 12-month period ended Sept. 30. It has approximately 1,000 drivers and support staff of 170. No margin information was provided but the deal is expected to be immediately accretive to earnings.
The carrier will continue to operate as MLS, reporting as an independent subsidiary through Schneider’s dedicated segment.
“Preserving the MLS identity is essential,” Schneider CEO Mark Rourke said in a press release. “The carrier’s family-owned nature combined with its strong culture and customer service make it a valuable contributor for growing Schneider’s dedicated operations.”
| Acquisition price | $263 million |
| MLS revenue run rate | $205 million ($170 million ex fuel) |
| Schneider revenue run rate | ~$5 billion (ex fuel) |
| Earnings accretion | immediately |
| Financing | cash |
Schneider’s dedicated segment had 4,240 trucks at the end of the third quarter, 46% of its overall TL fleet (and 42% of TL revenue). The MLS deal will put the dedicated operation on track to generate revenue of $1 billion annually and place Schneider closer to its goal of having both TL fleets similar in size.
The deal was financed with cash on hand, wiping out only half of Schneider’s third-quarter ending cash balance of $504 million.
Schneider’s ability to generate significant free cash flow has been evident for several quarters now as carriers have benefited from record demand and rates. The growing cash balance has been a top-of-mind topic among analysts and investors over the last year and a half. It used a $2 per share special dividend ($355 million) to satiate investors at the end of 2020.
Several other carriers have used M&A as a means of deploying cash amid a period of record margins and earnings. Last year saw a few notable transformational deals for carriers. Competitor Knight-Swift Transportation (NYSE: KNX) added less-than-truckload to its arsenal, and Werner Enterprises (NASDAQ: WERN) added a couple of fleets after not making any deals in its 65-year history.
“Schneider is a well-established company and a great cultural fit,” said MLS VP Dave DeMoss. “We are excited to be a key component to Schneider’s dedicated growth strategy.”
“We are thankful to have represented the fantastic team at Midwest Logistics and to have closed the transaction before 2022 commenced,” Billy Hart, managing partner at Bluejay Advisors told FreightWaves. Bluejay Advisors acted as the sell-side investment banker for MLS in the transaction.
Click for more FreightWaves articles by Todd Maiden.
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