Insights - July/August 2017 - 19

Intermodal Has Key Role in
Transport Mergers, Acquisitions

ntermodal transportation is, and will continue to be, an important component in the
fast-moving merger and acquisition, or M & A, market, both in North America and globally,
transportation industry experts believe.

The actual number of acquisitions within the U.S. domestic
intermodal business has been limited during 2017, but the
interest level is high.
"Intermodal continues to be an attractive sector. It makes the
value of combinations like truck and rail service more valuable
in the context of the ongoing consolidation of the broker and
forwarding businesses," Ben Gordon, managing partner at BG
Strategic Advisors, said. "We think there will be continued activity
in the intermodal industry over the next decade. Customers
are seeking a more complete solution to present to shippers.
Shippers want to use companies that have a national footprint
and a bundle of services that are more holistic, and drive across
the supply chain."
Others agreed.
"We've got more logistics
transactions in the works than at any
time in our history," said Don Wiggins,
president of Heritage Capital Group.
"We have heard of several
opportunities in the transportation
marketplace that involve intermodal,"
said Cowen & Co. analyst Jason Seidl.
Drayage acquisitions still are
attractive, said Thom Albrecht, who
Seidl
heads Sword & Sea Transport Advisors.
"In general, there is a seller's market
out there for mergers and acquisitions.
When you look at the intermodal side,
there is attractiveness because the
industry is coming off its worst year
since 2009 and expectations are
that the intermodal business will be
stronger in 2017. It's a good time to get
further into intermodal."
"Drayage consolidation has been
predicted for so long, but there have
Albrecht
been only a few companies that have
emerged with some size and scale," Albrecht said. "That space
will continue to see consolidation, but I don't think we will ever
see a 'Grand Poobah' of intermodal drayage that is two or three
or four times larger than the number two carrier. It's an industry
where the barriers to entry are low, and the economics can be
subpar."

Drayage Acquisition
A notable acquisition in the drayage sector was Forward
Air Corp.'s Central States Trucking unit acquiring drayage and
intermodal operator Atlantic. Based on recent results, the move
increased Forward Air's intermodal trucking revenue by about 60
percent.
Prominent intermodal service provider Hub Group Inc.
expanded its capabilities into the dedicated contract carriage
business by agreeing to buy Estenson Logistics.
"Hub has been talking about an acquisition to diversify for
about two years," Seidl said. "They have a lot of free cash flow
and cash on the balance sheet."
Hub's CEO Dave Yeager said adding Estenson creates crossselling opportunities totaling more than $100 million over the
next five years.
In the broader logistics sector, companies such as SunteckTTS have been active buyers. An example of intermodal's value
was the late 2016 creation of SunteckTTS, which combined two
companies' names, said Albrecht, who added that the purchase
of TTS added substantial intermodal capability for Sunteck.
Seidl said small to mid-sized intermodal marketing
companies are facing the need to combine because "it's hard for
them to compete with some of the larger competitors' contracts.
It behooves people to get bigger if they can."

Shipping Consolidation
On the world stage, China's COSCO agreed to spend $6.3
billion for majority control of Orient Overseas Container Line,
continuing a series of ocean carrier alliances and acquisitions
that are on target to give six carriers 75 percent of the container
shipping market worldwide. Earlier this year, Maersk Line
acquired Hamburg Sud, Hapag Lloyd purchased CSAV and
Japan's three largest ocean carriers - MOL, NYK Line and "K"
Line - moved toward combining their businesses.
Wiggins said the COSCO acquisition creates head-tohead battles among large competitors, though it could create
opportunities for nimble smaller businesses.
Another reason M & A activity is likely to increase is recent
statements from Bradley Jacobs, XPO Logistics CEO, who said
his company will be back in buying mode after two years of
integrating past acquisitions.
"We're going to start doing acquisitions again later this year
Mergers - continued on page 21
July/August 2017 | Intermodal Insights

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