Roadrunner Agrees to Purchase Logistics Firm for $97.5 Million

Bidding to broaden its market reach, less-than-truckload hauler Roadrunner Transportation Systems Inc. has agreed to acquire Prime Logistics Corp., a food logistics firm that operates as Prime Distribution Services Inc., for about $97.5 million.

Under the terms of the agreement, disclosed Aug. 23, Roadrunner, Cudahy, Wis., will part with $94.5 million in cash and $3 million in new stock for its target, which is based in Plainfield, Ind.

With PDS beginning to expand into shipping health and beauty products as well as apparel, tools and toys, Roadrunner sees tremendous opportunity for growth, said Roadrunner CEO Mark DiBlasi.

“The merger with Roadrunner is a key step in the next phase of our strategy,” Kevin Salwin, PDS vice president, added in a statement.

The PDS deal is the fourth takeover of the year for Roadrunner, which went public in May 2010 and lately has been on a buying binge.

On Aug. 2, Roadrunner said it paid about $7.5 million for The James Brooks Co., a hauler of vegetables, fruit and nuts from the California ports of Los Angeles, Long Beach and Oakland.

On May 31, Roadrunner said it bought refrigerated carrier Bruenger Trucking Co., Wichita, Kan., in a deal worth up to $13.6 million.

And in February, Roadrunner paid $20 million for shorthaul trucking company Morgan Southern Inc. of Conley, Ga.

Roadrunner said PDS is a non-asset logistics service provider that picks up $50 million in nonperishable food shipments, moves them into four warehouses and then consolidates them into truckloads.

PDS handles more than a billion pounds of food and has 2 million square feet of warehouse space, Roadrunner said.

The company, which uses 20 to 40 truckload carriers, counts Wal-Mart Stores Inc., Cosco Wholesale Corp., Target Corp. and Kroger Co. among its 200 customers, DiBlasi said.

Roadrunner ranks No. 38 on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada.

Prime Distribution Services is not connected to refrigerated hauler Prime Inc., which is based in Springfield, Mo., and has a subsidiary called Prime Logistics.

To finance the transaction, Roadrunner will expand its credit line to $240 million, consisting of a five-year, $100 million term loan and a $140 million revolver. Roadrunner expects to have between $85 million and $90 million left on the revolver for more acquisitions, according to Roadrunner Chief Financial Officer Peter Armbruster.

The $3 million in new stock goes to Mark Holden, PDS president.

DiBlasi said Roadrunner paid about 6.5 to 7 times PDS’ earnings before interest, taxes, depreciation and amortization (EBITDA) in this acquisition, which is higher than the four or six times it normally pays for a deal. DiBlasi justified the higher price by saying PDS will add immediately to earnings and is growing 20% annually.

The deal provides additional opportunity for Roadrunner to work with PDS customers through its truckload service as well as its reefer business, according to Jon Langenfeld, an analyst with Robert W. Baird & Co. Roadrunner provides PDS a broader footprint for selling its warehousing and consolidation services.

PDS will operate as part of Roadrunner’s truckload divisions and the former PDS executives, all of whom are staying on, will report to Brian van Helden, Roadrunner’s truckload president.

Despite the recession, PDS’ revenue rose 6.3% from 2007 to 2009 and the company posted $67.5 million in 2010 sales, Armbruster said. He added that for the first six months of 2011, PDS earned $6.2 million and sales jumped 19% to $38 million.

PDS’ business is somewhat seasonal, with its busiest period in its fiscal fourth quarter. The company is on track to do $80 million in business this year, Armbruster said. The PDS fiscal year ends June 30.