Transportation & Logistics
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TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ JANUARY 2015 www.harriswilliams.com Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorised and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business. 0 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ JANUARY 2015 WHAT WE’RE READING CONTENTS LOGISTICS | SHIPPERS ADJUST SUPPLY CHAINS TO COPE WITH CONGESTION . M&A TRANSACTIONS From port congestion and new ocean alliances to driver shortages and rail service . PUBLIC MARKETS OVERVIEW worries, the global supply chain is more fragile than at any point in recent memory. Three shippers discuss how they’re adjusting to the challenges. STOCK PRICE PERFORMANCE Journal of Commerce . OUR GROUP LOGISTICS | WHAT TO DO WITH THE RETURNS? The holiday season is now over and from all indications; it was a success for online CONTACTS retail. While all data has yet to be compiled, estimates show online retail sales increased 15% to 18%. Meanwhile, estimates suggest U.S. in-store sales declined 7% UNITED STATES to 10%, depending on source. Transport Intelligence Frank Mountcastle Managing Director TRUCKING | A COMEBACK FOR DEDICATED CONTRACT CARRIAGE [email protected] +1 (804) 915-0124 A crisis in trucking capacity is forcing shippers to embrace new strategies to keep Jason Bass their freight moving while maintaining customers’ delivery commitments. To Managing Director guarantee the trucks they need, many shippers are contracting with asset-based [email protected] providers for dedicated carrier services. That’s a marked shift from the greater +1 (804) 915-0132 reliance we’ve seen in recent years on brokered freight. Joe Conner Transport Topics Managing Director [email protected] RAIL | U.S. SHIPPERS PULL BACK ON INTERMODAL FOR FIRST TIME SINCE 2010 +1 (804) 915-0151 Jeff Burkett U.S. intermodal shippers surveyed by an investment research firm pulled more Vice President freight off intermodal trains and put it back on trucks during the third quarter than [email protected] vice-versa, the first time the survey tracked intermodal conversion losing ground +1 (804) 932-1334 since 2010. Shippers said they expect to further decelerate their conversion of loads to rail, but survey results suggest intermodal rails will ultimately begin Jershon Jones Vice President regaining share over the next six to 12 months. [email protected] Journal of Commerce +1 (804) 932-1356 Jeff Kidd RAIL | AAR REPORTS INCREASED FREIGHT RAIL TRAFFIC FOR 2014 Vice President [email protected] The Association of American Railroads (AAR) today reported increased freight rail +1 (804) 915-0178 traffic for all of 2014, December and the week. Total combined traffic for 2014 on U.S. railroads was 28,673,776 carloads, containers, and trailers, up 1,233,184 units or EUROPE 4.5 percent over 2013 and the highest annual total since 2007. Association of American Railroads Jeffery Perkins Managing Director MARINE | PANAMA CANAL EXPANSION A BOON FOR MIDSIZE COMPANIES, TOO [email protected] +49 (0) 69 3650638 00 When the much-anticipated expansion of the Panama Canal is completed late next year, cargo ships the size of aircraft carriers will ferry goods from Latin America and Asia directly to East Coast ports and back. These ships — up to two- and-a-half times bigger than those currently allowed — will uproot trade patterns developed over the last century and will affect nearly every sector of the U.S. economy. CFO AIR | GLOBAL AIR FREIGHT TO GROW BY 4.5% IN 2015, SAYS IATA International Air Transport Association (IATA) expects global air freight markets to expand by 4.5% in 2015, outpacing the projected growth for world trade of 4%. The trade association formed by global airlines revealed that demand measured in freight tonne kilometers (FTK) rose by 4.2% in November 2014 as compared to same time in the previous year. Carriers in the Asia-Pacific and Middle East regions has experienced the most prominent growth, 5.9% and 12.9% respectively. Logistics Business Review www.harriswilliams.com PAGE | 1 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ JANUARY 2015 M&A TRANSACTIONS RECENT M&A TRANSACTIONS1,2 Date Sector Target Business Description Acquirer Ontario Teachers' Pension Pending Logistics PODS Enterprises, Inc. Provides container-based moving and storage services. Plan GENCO Distribution Provides product lifecycle and reverse logistics solutions in North Pending Logistics FedEx Corporation Systems, Inc. America and internationally. Non-asset based third party logistics provider to the petroleum and Pending Logistics Charter Brokerage LLC Berkshire Hathaway Inc. chemical industries. Engages in Jones Act container shipping with primary service to ports Matson Navigation Pending Marine Horizon Lines, Inc. within the continental United States, Alaska, Hawaii, and Puerto Rico. Company, Inc. Neovia Logistics Provides third party contract logistics services, including warehouse The Goldman Sachs Group Pending Logistics Services, LLC management, fulfillment, and distribution solutions. Rhone Capital L.L.C. Provides regional less-than truckload, truckload, and specialized 1/9/2015 Trucking Gardewine Group Inc. Mullen Group Ltd. truckload services primarily in Manitoba and Ontario. Largest provider of online freight brokerage services in the United C.H. Robinson Company, 1/5/2015 Logistics Freightquote.com, Inc. States. Inc. Provides international e-commerce support services, including duty 12/16/2014 Logistics Bongo International, LLC FedEx Corporation and tax calculations, export compliance, and currency conversions. Provides freight transportation services in Canada and the United 12/2/2014 Trucking Contrans Group Inc. TransForce Inc. States, including van, flatbed, waste, tank, dump, and logistics. Logistics Management Non-asset based third party logistics provider with particular strength 11/5/2014 Logistics Transplace Inc. Solutions LLC in the chemical and industrial manufacturing sectors. Regional for-hire and dedicated truckload carrier providing dry van 10/24/2014 Trucking A&S Services Group, LLC Celadon Group Inc. transportation, logistics, warehousing, and distribution services. Transportation Insight, Full-service, non-asset based third party logistics provider in North 10/15/2014 Logistics Ridgemont Equity Partners LLC America. United Parcel Service, 10/7/2014 Logistics i-parcel, LLC U.S.-based international e-commerce enabler and logistics company. Inc. Lone Star Transportation, Provides heavy haul and open-deck carrier services in North 10/3/2015 Trucking Daseke, Inc. LLC America. Transport Investments, Asset-light company focused on providing flatbed, drop-deck, Yukon Partners 9/18/2014 Trucking Inc. specialized, and heavy-haul trucking and brokerage services. Revelstoke Capital New Breed Holding Provides complex, technology-enabled contract logistics for 9/2/2014 Logistics XPO Logistics, Inc. Company companies in high-growth sectors. Jacobson Holding Offers value-added warehousing services in North America with Norbert Dentressangle 8/29/2014 Logistics Company, L.C. integrated domestic transportation management capabilities. S.A. Provides supply chain solutions to customers with sensitive or time- Roadrunner Transportation 8/27/2014 Logistics Active Aero Group, Inc. critical freight, principally in the United States and Mexico. Systems, Inc. PAGE | 2 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ JANUARY 2015 PUBLIC MARKETS OVERVIEW TEV / LTM EBITDA TEV / 2015P EBITDA Logistics Providers 11.5x Logistics Providers 10.1x Rail & Rail Services 10.8x Rail & Rail Services 8.7x Marine 9.5x Marine 8.4x Trucking 8.7x Trucking 7.0x Transportation Transportation 7.7x 6.0x Equipment Equipment AVERAGE REVENUE GROWTH (2011 – 2014E) AVERAGE REVENUE GROWTH (2014E – 2016P) Rail & Rail Services 11.8% Trucking 7.7% Trucking 10.0% Marine 7.6% Transportation 8.7% Equipment Rail & Rail Services 6.6% Logistics Providers 7.6% Logistics Providers 6.6% Transportation Marine 6.1% 5.9% Equipment AVERAGE EBITDA GROWTH (2011 – 2014E) AVERAGE EBITDA GROWTH (2014E – 2016P) Rail & Rail Services 18.8% Trucking 13.7% Trucking 14.0% Marine 12.9% Marine 9.0% Logistics Providers 11.6% Transportation 8.7% Rail & Rail Services 11.2% Equipment Transportation Logistics Providers 8.0% 10.3% Equipment PAGE | 3 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ JANUARY 2015 STOCK PRICE PERFORMANCE MEDIAN % CHANGE (1 MONTH) MEDIAN % CHANGE (12 MONTH) Transportation 8.3% Equipment Trucking 29.3% Rail & Rail Services 0.6% Rail & Rail Services 12.8% Transportation Trucking (0.3%) 9.7% Equipment Logistics Providers (0.3%) Logistics Providers 4.1% Marine (0.4%) Marine (18.6%) TRAILING TWELVE MONTHS (Indexed to January 13, 2014) 50% 40% 30% 20% 10% 0% (10%) (20%) 1/13/14 4/13/14 7/13/14 10/13/14 1/13/15 Logistics Providers Trucking Rail & Rail Services Marine Transportation Equipment S&P 500 Index PAGE | 4 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ JANUARY 2015 OUR GROUP Harris Williams & Co. is a leading advisor to the transportation and logistics M&A market. Our Transportation & Logistics Group has experience across a broad range of sectors, including third-party logistics, rail and rail services, marine transportation, transportation equipment, niche transportation, automotive and heavy duty vehicle, and airport and aviation services. 2014 CLOSED T&L TRANSACTIONS