Hub Group Expands Business Offerings With $83 Million Purchase of Exel Unit

By Rip Watson, Senior Reporter

This story appears in the April 11 print edition of Transport Topics. Click here to subscribe today.

Hub Group Inc. on April 4 said it purchased Exel Transportation Services, another third-party freight provider, for $83 million to expand its business offerings.

From a revenue standpoint, the total of $717 million last year for ETS will add about 40% to Hub’s revenue of $1.83 billion.

ETS was part of Exel, which is owned by Deutsche Post, the German postal operator and the DHL package express service. Exel Transportation, whose sales last year were $4.2 billion, remains in business under that name.

“We are extremely pleased to welcome Mode’s [agents], employees and customers,” said David Yeager, Hub Group’s CEO. “We are bringing together two strong and successful companies with highly complementary service offerings.”

The Mode agent network includes about 300 independent business operators. The company’s offices are in Dallas and Memphis, Tenn.

Hub paid cash in the sale, Chief Financial Officer Terri Pizzutto said. Exel Transportation Services, or ETS, will be known as Mode Transportation.

Mode’s primary businesses, truck brokerage and intermodal, each accounted for about 40% of revenue, with less-than-truckload providing the rest.

At end of 2010, Hub’s intermodal business was 70% of revenue, with brokerage close to 20% and logistics representing the balance.

ETS revenue last year rose 16%, slower than the 21% increase at Hub.

Hub intends to increase Mode’s operating margin from the current 0.5% per dollar of revenue and envisions that Hub Group’s earnings will increase by 3 cents to 6 cents a share this year. Hub’s operating margin last year was 3.8%, and earnings per share were 91 cents.

“These will be two separate and autonomous organizations,” Mark Yeager, Hub’s chief operating officer, said on an April 4 conference call, referring to Hub and Mode.

Hub also has decided to boost its acquisition of domestic containers to 4,000 this year from 3,000 to help provide capacity for Mode as it operates separately.

David Yeager said the purchase will help Hub increase its market share and gain more access to small and midsize customers as well as provide a fleet of 500 temperature-controlled trailers to further increase capacity.

“The one thing we didn’t want to do was make this acquisition and not have capacity,” he said.

ETS was founded 22 years ago as an intermodal marketing company known as Mark VII. It was bought in 1999 by MSAS Global Logistics, which was in turn acquired by Exel in 2000.

Exel Transportation “remains committed to its core business, focused on providing supply chain management, warehousing and transportation solutions,” spokeswoman Sarah Jackson told Transport Topics.

“We are committed to providing customers with a comprehensive transportation service offering,” Jackson said, including transportation management, dedicated contract carriage and home/business delivery services.

Exel Transportation also will continue offering maintenance and repair and just-in-time manufacturing support.

Jim Damman, president of Mode, will remain in that post as the company operates independently.