KLLM Owners to Buy FFE in $38.2 Million Reefer Deal
This story appears in the July 22 print edition of Transport Topics.
Two Mississippi businessmen have agreed to purchase Frozen Food Express Industries for $38.2 million, which could lead to the creation of the third-largest refrigerated carrier in North America.
Duff Brothers Capital Corp.’s offer of $2.10 a share was unanimously approved by Frozen Food Express’ board of directors, including three key executives, FFE announced July 15.
Run by brothers Thomas and James Duff, the company already owns KLLM Transport Services.
FFE, based in Dallas, ranks No. 66 on the Transport Topics Top 100 list of for-hire carriers, and KLLM is No. 74. In the refrigerated sector, the two carriers are Nos. 6 and 7, respectively.
“We are excited about the opportunity to add another leader in the temperature-controlled trucking industry to our family group of businesses. With the synergies and increased capacity that we can gain from the ownership of both FFE and KLLM, we know that we will be able to enhance the quality service that both companies have been providing to their customers,” the brothers said in the FFE statement.
“With our resources, we will be able to bring to FFE the financial strength that is needed to preserve and expand its operations for its valued employees for years to come,” the Duffs added.
As a combined entity, FFE and KLLM would have $740.7 million in annual revenue, behind C.R. England Inc. and Prime Inc. among the largest U.S. and Canadian refrigerated carriers and ahead of Stevens Transport. Together FFE and KLLM have 3,062 company trucks and access to 430 owner-operator trucks.
“The FFE name will continue, and we will run the companies separately,” said Russell Stubbs, the CEO of FFE and a member of the family that founded the company in 1948. Stubbs’ father, Stoney “Mit” Stubbs Jr., is chairman of FFE. Both, along with John Hickerson, FFE’s chief operating officer, have endorsed the acquisition. The three own a combined 12.8% of FFE’s common shares.
Russell Stubbs said he and Hickerson will stay on as executives after the deal closes in late August or early September, assuming FFE shareholders give approval.
Attempts to contact the Duff brothers were unsuccessful, but KLLM’s CEO, James Richards Jr., confirmed that the Duffs have owned the Jackson, Miss.-based reefer carrier since 2008.
FFE has had financial problems in recent years. Its annual report filed with the Securities and Exchange Commission in March said the company’s last profitable year was 2008, when it had net income of $605,000 and an operating ratio — expenses as a percentage of revenue — of 99.6.
From 2009 through 2012 the company lost between $11.9 million and $36.7 million a year and operating ratio fluctuated between 103.5 and 109.8.
FFE is unusual in that it has a large, national less-than-truckload refrigerated business in addition to a truckload reefer business. The younger Stubbs said FFE is about 55% truckload and 45% LTL by revenue.
Its three operating companies are FFE Transportation Services and Lisa Motor Lines on the asset-based side, and FFE Logistics for non-asset-based services.
In contrast, KLLM works in the more traditional truckload sector of the refrigerated realm, along with the typical related services of dedicated contract carriage and intermodal.
