Con-way to Purchase CFI
LTL Offers $750 Mln. for Truckload Carrier
By Jonathan S. Reiskin, Associate News Editor
This story appears in the July 23 print edition of Transport Topics.
Less-than-truckload carrier Con-way Inc. launched a major foray into the truckload sector by reaching an agreement last week to buy Contract Freighters Inc. for $750 million in cash.
Douglas Stotlar, Con-way’s chief executive officer, announced the deal July 16 and said he expects to seal it by Sept. 30. He also said Herb Schmidt, the CEO of CFI, would remain onboard to manage truckload operations.
While the LTL sector has been consolidating over the last decade through mergers, acquisitions and bankruptcies, its leading carriers have usually been reticent in their approach to the truckload business. LTL carriers have dabbled in truckload transportation, but this deal would unite the third-largest LTL with the nation’s 22nd-largest truckload company.
“We really think there is no model for this; it’s something new in the industry,” said Thomas Nightingale, Con-way’s chief marketing officer.
“CFI has the scale and reputation in the truckload industry that we at Con-way wanted. Other carriers may have kicked the tires on such a deal, but they haven’t actually done it. This is a new space in the industry that is not analogous to what the major parcel carriers [UPS Inc. and FedEx Corp.] have done with their purchase of LTL carriers,” Nightingale said in an interview. He added that talks between the companies started eight months ago.
Stotlar said Con-way would finance the deal through roughly equal amounts of cash on hand and new debt.
Con-way, San Mateo, Calif., had 2006 revenue of $4.22 billion and is best known for its Con-way Freight regional LTL network. In addition, the corporation owns Menlo Worldwide, a third-party logistics provider; trailer maker Road Systems Inc.; and Con-way Transportation, a truckload carrier that also offers brokerage services.
CFI’s average truckload movement is 940 miles, mainly along north-south lanes. About 40% of the company’s revenue comes from cross-border trade with Mexico, Schmidt said. The Joplin, Mo., carrier had 2006 revenue of $416.9 million, enough to rank No. 62 on the Transport Topics 100 list of the largest for-hire carriers in the United States and Canada. Con-way is No. 6 on the list.
Ann and Dick Griot and their family are the majority shareholders of privately held CFI, which does not report earnings.
However, during the conference call, stock analyst Thom Albrecht asked Schmidt to comment on Albrecht’s estimate that CFI has an operating ratio that ranges from 85 in a good year to 90 in a bad year. OR measures expenses as a percentage of revenue.
Schmidt did not confirm the estimate, but neither did he criticize it. Stotlar described Contract Freighters as “solidly profitable.”
Schmidt will be in charge of all truckload operations at Con-way, Stotlar said, estimating the new division would have annual revenue of $500 million. Given the size of CFI, that means Con-way’s current truckload business generates less than $100 million in annual revenue — or less than 5% of Con-way Freight.
Stotlar and Schmidt said they are still making plans on the issue of branding the truckload division, but have not yet reached a final decision.
Dipping a toe in truckload waters is not uncommon for LTL carriers. YRC Worldwide, the nation’s largest LTL, does truckload business through its USF Glen Moore unit. UPS Freight, ABF Freight System, Estes Express Lines and A. Duie Pyle Cos. are other examples of LTLs that do truckload work either to generate backhauls, diversify their business operations or keep capacity for linehaul movements after LTL freight is consolidated at terminals.
Perhaps the two best models — but on a smaller scale — for what Con-way and CFI are trying to do come out of the Southeast, where Averitt Express and Southeastern Freight Lines have gone beyond their LTL roots. Averitt offers various services usually associated with truckload carriers and Southeastern owns G&P Trucking, which had $139 million in 2006 truckload revenue.
As for the reason behind the diversification, Stotlar said he sees CFI as providing valuable services to reinforce the operations of Con-way Freight and Menlo Worldwide. Con-way Freight already is a substantial customer of CFI, providing 6% of the truckload carrier’s revenue, with CFI running linehaul trips for Con-way.
In addition, Stotlar said, Menlo could offer CFI truckload distribution to or from Menlo’s warehouse network, while Menlo Logistics could access CFI’s expertise on commerce with Mexico. As for benefits for CFI, Con-way Freight has a sales staff of 600 and a nationwide network of terminals and drop lots that far exceed CFI’s current levels.
Contract Freighters was founded in 1951 by Ursul Lewellan, Ann Griot’s father, said Bruce Stockton, a CFI vice president.
This story appears in the July 23 print edition of Transport Topics.
Less-than-truckload carrier Con-way Inc. launched a major foray into the truckload sector by reaching an agreement last week to buy Contract Freighters Inc. for $750 million in cash.
Douglas Stotlar, Con-way’s chief executive officer, announced the deal July 16 and said he expects to seal it by Sept. 30. He also said Herb Schmidt, the CEO of CFI, would remain onboard to manage truckload operations.While the LTL sector has been consolidating over the last decade through mergers, acquisitions and bankruptcies, its leading carriers have usually been reticent in their approach to the truckload business. LTL carriers have dabbled in truckload transportation, but this deal would unite the third-largest LTL with the nation’s 22nd-largest truckload company.
“We really think there is no model for this; it’s something new in the industry,” said Thomas Nightingale, Con-way’s chief marketing officer.
“CFI has the scale and reputation in the truckload industry that we at Con-way wanted. Other carriers may have kicked the tires on such a deal, but they haven’t actually done it. This is a new space in the industry that is not analogous to what the major parcel carriers [UPS Inc. and FedEx Corp.] have done with their purchase of LTL carriers,” Nightingale said in an interview. He added that talks between the companies started eight months ago.Stotlar said Con-way would finance the deal through roughly equal amounts of cash on hand and new debt.
Con-way, San Mateo, Calif., had 2006 revenue of $4.22 billion and is best known for its Con-way Freight regional LTL network. In addition, the corporation owns Menlo Worldwide, a third-party logistics provider; trailer maker Road Systems Inc.; and Con-way Transportation, a truckload carrier that also offers brokerage services.
CFI’s average truckload movement is 940 miles, mainly along north-south lanes. About 40% of the company’s revenue comes from cross-border trade with Mexico, Schmidt said. The Joplin, Mo., carrier had 2006 revenue of $416.9 million, enough to rank No. 62 on the Transport Topics 100 list of the largest for-hire carriers in the United States and Canada. Con-way is No. 6 on the list.
Ann and Dick Griot and their family are the majority shareholders of privately held CFI, which does not report earnings.
However, during the conference call, stock analyst Thom Albrecht asked Schmidt to comment on Albrecht’s estimate that CFI has an operating ratio that ranges from 85 in a good year to 90 in a bad year. OR measures expenses as a percentage of revenue.
Schmidt did not confirm the estimate, but neither did he criticize it. Stotlar described Contract Freighters as “solidly profitable.”
Schmidt will be in charge of all truckload operations at Con-way, Stotlar said, estimating the new division would have annual revenue of $500 million. Given the size of CFI, that means Con-way’s current truckload business generates less than $100 million in annual revenue — or less than 5% of Con-way Freight.
Stotlar and Schmidt said they are still making plans on the issue of branding the truckload division, but have not yet reached a final decision.
Dipping a toe in truckload waters is not uncommon for LTL carriers. YRC Worldwide, the nation’s largest LTL, does truckload business through its USF Glen Moore unit. UPS Freight, ABF Freight System, Estes Express Lines and A. Duie Pyle Cos. are other examples of LTLs that do truckload work either to generate backhauls, diversify their business operations or keep capacity for linehaul movements after LTL freight is consolidated at terminals.
Perhaps the two best models — but on a smaller scale — for what Con-way and CFI are trying to do come out of the Southeast, where Averitt Express and Southeastern Freight Lines have gone beyond their LTL roots. Averitt offers various services usually associated with truckload carriers and Southeastern owns G&P Trucking, which had $139 million in 2006 truckload revenue.
As for the reason behind the diversification, Stotlar said he sees CFI as providing valuable services to reinforce the operations of Con-way Freight and Menlo Worldwide. Con-way Freight already is a substantial customer of CFI, providing 6% of the truckload carrier’s revenue, with CFI running linehaul trips for Con-way.
In addition, Stotlar said, Menlo could offer CFI truckload distribution to or from Menlo’s warehouse network, while Menlo Logistics could access CFI’s expertise on commerce with Mexico. As for benefits for CFI, Con-way Freight has a sales staff of 600 and a nationwide network of terminals and drop lots that far exceed CFI’s current levels.
Contract Freighters was founded in 1951 by Ursul Lewellan, Ann Griot’s father, said Bruce Stockton, a CFI vice president.
