Roadrunner Buys Bruenger Trucking as Pace of Acquisitions Accelerates
This story appears in the June 6 print edition of Transport Topics.
Less-than-truckload carrier Roadrunner Transportation Systems said May 31 it had bought refrigerated carrier Bruenger Trucking Co. in a deal that could be worth up to $13.6 million.
Roadrunner, Cudahy, Wis., said the acquisition should add immediately to earnings. Bruenger, Wichita, Kan., had 2010 revenue of $23 million and cash flow of $3.5 million.
The announcement is one of an increasing number of acquisitions, indicative of greater vigor for trucking, said a merger and acquisitions consultant.
“The acquisition of Bruenger broadens our geographic coverage and expands our capacity network. Bruenger’s Midwest presence and east-west traffic will also enable us to more effectively cross-sell our truckload services,” Roadrunner CEO Mark DiBlasi said in the company statement, adding that former owner Butch Bruenger and other managers will remain with the carrier.
Roadrunner paid $10.6 million to Bruenger as the base price and said an extra “earn-out” segment is a maximum of $3 million, with the precise number to be determined by performance over the next 3½ years.
“We believe the acquisition should be immediately accretive, as the company’s [Bruenger’s] margins are better than the truckload segment’s average,” stock analyst David Ross told clients of Stifel, Nicolaus & Co.
Ross said Bruenger’s operating ratio — expenses as a percentage of revenue — is about 91.
Roadrunner ranks No. 47 on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada. While LTL work brings in a majority of Roadrunner’s revenue — $400 million a year — the truckload shipping brings in another $250 million, DiBlasi said in an interview.
Roadrunner is engaged in a diversification strategy, DiBlasi said, because shippers want to do business with fewer vendors who offer more services.
“We cross-sell in all segments. Five years ago we used to be all longhaul LTL, but now we’re also in truckload dry vans, refrigerated, flatbeds, drayage and brokerage,” DiBlasi said.
He said Roadrunner will keep the Bruenger name on the company’s trucks, for now.
In related activity, NFI Industries announced the expansion of its warehouse business through an acquisition, and Canadian company EIS Capital Corp. announced plans to purchase Diamond B Transport Ltd., Lloydminster, Alberta, for C$4.2 million in stock and cash.
Motor carriers are now buying good companies for rising prices, said Lana Batts, a partner with M&A consulting firm Transport Capital Partners.
“There’s a lot more interest now than two or three years ago. Three years ago it was all sellers and no buyers . . . Now I’ve got more buyers than sellers looking for help,” said Batts, a former president of the Truckload Carriers Association.
The buyers with whom she and her partners speak are looking for solid companies rather than distressed firms at fire-sale prices.
“Distressed carriers often have old equipment, low [freight] rates and drivers with bad CSA scores. Now it’s the good carriers that have something to bring to the table,” Batts said, referring to the new federal Compliance, Safety, Accountability program.
Batts added that pricing for carriers is better than a year ago, but still not at a high level, and that she expects acquisition prices to rise for at least 18 months.
Ross estimated the price-earnings multiple for the deal ranging between 3 and 3.9.
In Canada, EIS, a publicly traded company based in Edmonton, Alberta, said May 24 it has entered into a letter of intent to buy Diamond B, an oilfield services carrier.
EIS said it wants to close around July 4 and that it will pay Diamond B owner Murray Barnett C$2 million in cash and 1.25 million EIS common shares, which closed at C$1.76 on May 30, valuing them at about C$2.2 million.
