TRANSPORTATION & LOGISTICS INDUSTRY UPDATE | NOVEMBER 2017 www.harriswilliams.de Harris Williams & Co. Ltd is a private limited company authorised and regulated by the Financial Conduct Authority, incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales under company number 07078852. Directors: Mr. Ned Valentine, Mr. Paul Poggi, Mr. Thierry Monjauze and Mr. Aadil Khan. Harris Williams & Co. Ltd Niederlassung Frankfurt (German branch) is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main, Germany, under registration number HRB 96687, having its business address at Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany. Permanent Representative (Ständiger Vertreter) of the Branch Niederlassung: Mr. Jeffery H. Perkins. 0 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ NOVEMBER 2017 WHAT WE’RE READING CONTENTS LOGISTICS | E-COMMERCE BOOSTS U.S. SHIPPING NETWORKS . M&A TRANSACTIONS Resurgent demand in the long-stagnant industrial sector and a big seasonal boost . PUBLIC MARKETS OVERVIEW in e-commerce are pushing more goods through shipping networks on the land, . STOCK PRICE PERFORMANCE water and air, say operators who expect the strengthening U.S. economy to keep . OUR GROUP the growth going into 2018. From seaports in Southern California to truck docks at central Ohio warehouses, shipping across the U.S. is picking up at a pace that freight companies say they haven’t seen in several years. The Commerce Department reported Wednesday that U.S. economic output grew at a 3.3% CONTACTS annual rate in the third quarter, faster than earlier estimated, and the reports from shipping sites suggest the muscular economic growth is continuing in Q4. UNITED STATES Wall Street Journal Frank Mountcastle TRUCKING | U.S. TRUCK FIRMS ACCELERATE INTO THE MERGING LANE Managing Director [email protected] The consolidation of the U.S. trucking industry is picking up speed, with big trucking +1 (804) 915-0124 companies and private equity funds scooping up smaller firms as a U.S. regulatory mandate is set to go into effect and as drivers push for higher wages. There have Jason Bass Managing Director been 44 publicly announced freight movement and logistics deals within the U.S. [email protected] so far this year, already topping the 38 deals announced in 2016. The total is likely +1 (804) 915-0132 much higher because most deals are private. The new mandate to start using electronic logging devices makes it harder for trucking firms to dodge federal Joe Conner limits on the hours drivers can work and will likely cut into productivity. That would Managing Director pressure already razor-thin margins at smaller trucking firms, fueling consolidation. [email protected] +1 (804) 915-0151 Reuters Jeff Burkett MARINE | OCTOBER IMPORTS TURN IN STRONG PERFORMANCE Director [email protected] The ongoing trend of very positive momentum for U.S.-bound waterborne +1 (804) 932-1334 shipments remained firmly intact in October, according to data released by Jershon Jones global trade intelligence firm Panjiva. October shipments rose 3.2% annually to Director 1,016,892, which was ahead of September’s 976,605, while the annual spread in [email protected] October was down compared to September’s 4.9%. Panjiva said this represents +1 (804) 932-1356 the eighth consecutive month of growth and 15 of the last 16 months. On a year- Jeff Kidd to-date basis through October, shipments are up 3.6% annually compared to the Vice President same period a year ago at 9,629,017. [email protected] Logistics Management +1 (804) 915-0178 James O’Malley RAIL | SAFER TRAINS LED TO BEST MONTH IN INTERMODAL HISTORY Vice President [email protected] Shippers haven't lost their love affair with the railroads, especially their love affair +1 (804) 915-0165 with economical freight transportation. That love affair resulted in October 2017 representing the best month for intermodal rail traffic in history. There have been record levels of private spending on capital improvements and maintenance over the last five years and more than $635 billion spent since 1980. These investments have significantly contributed to freight rail’s strong safety record. With new safety EUROPE technologies and methods, intermodal accident rates are down 44%, equipment- caused accidents are down 34%, track-caused accidents dropped 53%, and Jeffery Perkins derailments are down 44%. Managing Director Material Handling & Logistics [email protected] +49 (0) 69 3650638 00 AIR | ANOTHER YEAR OF SOLID AIR FREIGHT DEMAND There will be no reduction in air freight volumes over the next 12 months, and the robust demand will support improving profitability, according to airline executives responding to an International Air Transport Association (IATA) survey. Outlook for air freight remained strong, and with several months of double-digit growth in 2017, the current IATA forecast of 7.5% growth in air freight demand for the year appears to have “significant upside potential” even if the industry is approaching a cyclical peak. In its monthly update, IATA said the strong performance of air freight demand corresponded with the pick-up in global trade. Journal of Commerce www.harriswilliams.de PAGE | 1 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ NOVEMBER 2017 M&A TRANSACTIONS(1,2,3) RECENT M&A TRANSACTIONS Date Sector Target Business Description Acquirer 11/21/2017* Marine Rand Logistics, Inc. Provides marine bulk freight shipping services throughout the Great American Industrial Lakes region Partners (AIP LLC) 11/20/2017 Logistics Logical Freight Solutions Provides international transportation and logistics services MNX Global Logistics P/L (LFS) 11/14/2017 Logistics Romeo Expeditors, Inc. / Provides ground transportation, freight forwarding, and support Day & Ross Transportation Korten Quality Systems, services Group, Inc. Ltd. 11/8/2017 Logistics Supreme Airport Shuttle Provides airport shuttle services through exclusive van and SuperShuttle International, LLC reservation services Inc. 11/1/2017 Logistics Savage Logistics, Inc. Provides third party logistics services Becker Logistics LLC 10/25/2017* Marine TRAC Intermodal LLC Provides marine and domestic chassis Direct ChassisLink, Inc. (DCLI) 10/23/2017 Logistics AIT Worldwide Logistics, Delivers tailored transportation solutions and offers supply chain Quad-C Management Inc. management 10/11/2017 Trucking Dallas Service Center Engages in mechanical and body shop repair services for semi trucks Ryder System and tractor trailers 10/9/2017 Logistics Radial Provides omnichannel commerce technology and operations bpost SA 10/9/2017 Rail ITS ConGlobal Owns and operates intermodal facilities and lifts AMP Capital 10/3/2017 Logistics IntegraCore Offers supply chain management solutions Visible Supply Chain Management 10/2/2017 Trucking Xpress Group Operates as a van and flatbed carrier, providing logistics solutions Titanium Transportation and reliable freight transportation services Group 9/25/2017 Logistics California Cartage Co. Owns and operates multiple highly-specialized logistics divisions and National Freight Industries drayage operations 9/18/2017 Trucking Celadon Group (Flatbed Operates as a dry van truckload carrier PS Logistics Trucking Division) 9/18/2017* Marine Maritime World LLC Provides maritime services DP World Ltd. (Dubai Maritime City) & Drydocks World 9/11/2017 Logistics Cargoguide Develops software on rate management solutions for freight WiseTech Global Limited forwarders and logistics providers 9/11/2017 Marine RH Marine B.V. Provides services for the maritime sector Pon Holdings 9/7/2017 Trucking Haney Truck Line Provides high quality heavy haul and truckload transportation on the Wilson Logistics, Inc. West Coast 9/6/2017 Logistics Newgistics, Inc. Provides technology-enabled parcel logistics to the e-commerce Pitney Bowes Inc. and direct-to-consumer retail industry *Denotes pending transaction PAGE | 2 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ NOVEMBER 2017 PUBLIC MARKETS OVERVIEW(1) TEV / LTM EBITDA TEV / 2017E EBITDA Logistics Providers 12.0x Marine 11.2x Rail & Rail Services 11.1x Rail & Rail Services 10.9x Marine 10.5x Logistics Providers 10.9x Transportation Trucking 9.4x 8.6x Equipment Transportation 8.8x Equipment Trucking 8.6x AVERAGE REVENUE GROWTH (2013 – 2016) AVERAGE REVENUE GROWTH (2016 – 2018P) Transportation Transportation Equipment 4.7% 10.4% Equipment Logistics Providers 4.0% Logistics Providers 9.5% Trucking 2.6% Marine 6.4% Rail & Rail Services 2.1% Rail & Rail Services 0.7% Marine (4.3%) Trucking 0.3% AVERAGE EBITDA GROWTH (2013 – 2016) AVERAGE EBITDA GROWTH (2016 – 2018P) Transportation Transportation 19.4% 19.9% Equipment Equipment Rail & Rail Services 6.0% Logistics Providers 13.1% Logistics Providers 5.1% Rail & Rail Services 3.2% Trucking 4.4% Trucking 3.0% Marine (0.8%) Marine(2.7%) PAGE | 3 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ NOVEMBER 2017 STOCK PRICE PERFORMANCE(1) MEDIAN % CHANGE (1 MONTH) MEDIAN % CHANGE (12 MONTH) S&P 500 0.8% Transportation 54.0% Equipment Rail & Rail Services (0.2%) Trucking 34.4% Logistics Providers (0.4%) Rail & Rail Services 18.3% Transportation Equipment (1.5%) S&P 500 17.6% Trucking (4.4%) Logistics Providers 12.7% Marine (8.9%) Marine (21.0%) TRAILING TWELVE MONTHS (Indexed to November 27th, 2016) 80% 60% 40% 20% 0% (20%) (40%) (60%)