XPO Logistics Bid for Con-way Could Shake Up LTL Sector
XPO Logistics’ dramatic bid to snatch up trucking capacity by acquiring Con-way Inc. for $3 billion could spawn similar acquisitions by non-asset-based companies, forcing rival less-than-truckload carriers to reassess their strategy and step up their game, LTL leaders said.
They spoke with Transport Topics days after the Sept. 9 move by Brad Jacobs, CEO of XPO, to broaden the company’s asset-light strategy by securing Con-way’s drivers and trucks before capacity becomes even scarcer.
Tom Connery, president of New England Motor Freight, said the move will prompt a strategic evaluation.
“Do [non-asset companies] feel that this will take capacity out of the market?” Connery asked. “If they feel that they are losing capacity, will it force them to move into a similar space?”
Connery said it’s a good move on Jacobs’ part. “He sees driver and capacity issues on the horizon, which we all see.”
NEMF is a unit of Shevell Cos., which ranks No. 62 on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada.
“Everyone wants to round out their [service] portfolio,” said Steve Gast, president of Wilson Trucking, citing other recent moves such as UPS Inc.’s July acquisition of Coyote Logistics to offer U.S. truckload brokerage.
“The non-asset-based companies are coming to realize there’s some value in having assets.” Gast said. “We are coming to the end of a cycle when owning assets was considered bad thing by the investment community.”
“This deal sends a message to the LTL industry that things are changing,” said Brent Holliday, CEO of regional carrier Nebraska Transport Co. “There are going to be a lot of marriages between asset-based and non-asset-based companies because it makes sense.”
He added, “This could be one of those benchmark moments.”
The deal could mirror the emergence of third-party logistics operators, which transformed the trucking industry and prompted asset-based carriers to venture into logistics, Holliday said.
“It’s going to be interesting to see how it plays out,” he said. “Anytime that you put two companies together, there will be hiccups.”
Jett McCandless, chairman of LTL carrier Shift Freight, envisioned post-acquisition changes, while praising the move as “a great link to capacity.”
He expects cuts in “bloated” management after failed attempts to change business processes, and operational changes to an “over-engineered” network.
“It’s very expensive to run a network too fast,” McCandless said.
He believes XPO will reduce costs by slowing some services and leveraging the ability to fill backhaul lanes with freight from XPO’s other units.
XPO — which offered $47.60 cash for each outstanding Con-way share — estimated future acquisition-related savings up to $210 million annually, a potential increase of about 80% from Con-way’s 2014 earnings before interest and taxes.
“It will be interesting to see how this acquisition affects the landscape of our industry,” said Rob Estes, CEO of No. 15 Estes Express Lines. “Estes has learned in its nearly 85 years of operations how dynamic the freight transportation industry can be. As always, our focus remains on providing the best freight transportation experience for our customers.”
All the trucking executives underscored the need to reinforce their own capabilities as they evaluated XPO’s move.
FedEx Corp. Executive Vice President Michael Glenn, whose company owns the largest LTL operator, said, “We understand what it takes to integrate a rather large acquisition like that, so we have to stay focused on our strategy and execute what we’re doing, and that’s exactly what we’ll do.”
“This business transaction doesn’t change how we at Saia Inc. approach the market,” said Rick O’Dell, CEO of the company, which ranks No, 26, adding that the focus remains on customer satisfaction, quality service and timely data.
Averitt Express spokesman Brad Brown said, “Now more than ever, providers like Averitt must be focused on creating innovative, multimodal solutions that demonstrate proven value to shippers.”
Averitt ranks No. 33.
Connery, Gast, McCandless and Holliday all told TT that they will maintain their own company strategies, at least for now.
Connery said that NEMF is pursuing both organic growth and expansion, including opening new terminals later this year in the Chicago, Detroit and Baltimore areas.
Gast said there won’t be a big change in operations, at least over the next 12 to 18 months, for the Southeast regional carrier.
“This makes us have to be on top of our game,” said Holliday. “The better we can anticipate the direction of our industry, the better off we are going to be.”
Roger Gilroy contributed to this article.
