Transportation & Logistics Industry Update
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TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ MARCH 2016 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 │ MARCH 2016 WHAT WE’RE READING CONTENTS LOGISTICS | WHY DOES VENTURE CAPITAL LOVE LOGISTICS STARTUPS? . M&A TRANSACTIONS Why is venture capital flooding into the transportation and logistics industry faster . PUBLIC MARKETS OVERVIEW than ever before? Because the industry needs it, former venture capitalists and . STOCK PRICE PERFORMANCE now logistics industry insiders told the 2016 TPM Conference here on Tuesday. “There has been a very entrenched way of doing things. It’s a very old industry. It’s . OUR GROUP a very storied industry,” said Renee Diresta, a former venture capitalist and now vice president of business development at Haven, developer of an automated freight procurement platform. “Logistics is a fundamental and lucrative field, but the cogs in the machine are antiquated. It’s ripe for disruption and venture CONTACTS capitalists know that”, he added. Journal of Commerce UNITED STATES TRUCKING | TRUCK FREIGHT RATES SLIDE IN SOFTENING SPOT MARKET Frank Mountcastle Managing Director Freight rates for long-haul truckers fell across all truck types in February as weak [email protected] demand and plentiful space on trucks continued to make life hard for fleet +1 (804) 915-0124 owners. Spot market rates, or the prices shippers pay for freight loads booked Jason Bass individually through brokers rather than under a long-term contract, were down Managing Director 18% in February compared with the same month a year ago for dry vans, the most [email protected] common type of big rigs, according to online freight marketplace DAT Solutions. +1 (804) 915-0132 Rates for refrigerated truck loads and flatbeds, which generally carry perishables Joe Conner and industrial equipment, respectively, both fell 14% in February, compared with a Managing Director year earlier, DAT said. [email protected] Wall Street Journal +1 (804) 915-0151 Jeff Burkett MARINE | PORT OF LONG BEACH REPORTS RECORD FEBRUARY IMPORTS Director [email protected] The nation’s second-largest port reported a record February for container volume, +1 (804) 932-1334 despite retailer expectations that imports in the first half of 2016 would slow. The Port of Long Beach, Calif. handled 295,870 loaded 20-foot equivalent units, a Jershon Jones standard measure for container cargo, on the import side. That was a February Director [email protected] record for the port, and a 45% increase over February of 2015, when protracted +1 (804) 932-1356 labor contract negotiations, among other issues, led to weeks of severe congestion and low container volumes at ports up and down the West Coast. Jeff Kidd Compared with February 2014, before the congestion became a problem, imports Vice President at the Port of Long Beach were up 9%. [email protected] +1 (804) 915-0178 Wall Street Journal James O’Malley RAIL | INTERMODAL CONTINUES TO CARRY THE DAY Vice President [email protected] Aided by a labor dispute at West Coast ports last year that impacted volume, +1 (804) 915-0165 intermodal traffic experienced a spike of nearly 13% in February 2016, compared to the prior-year period, the Association of American Railroads (AAR) said on March 2, 2016, reporting weekly traffic as well as February traffic. Carload traffic remained weak. “The economy is still giving off a lot of mixed signals, and rail EUROPE traffic is too,” said AAR Senior Vice President John T. Gray. “Coal carloads remain very troubling, intermodal is doing well, and the other rail traffic categories are Jeffery Perkins somewhere in between. Managing Director RailwayAge [email protected] +49 (0) 69 3650638 00 AIR | GLOBAL AIR CARGO OFF TO STRONG 2016 The global air cargo market got off to a strong start in 2016, with volume up 2.7 percent year-on-year, the fastest growth rate since last April, the International Air Transport Association said. While this extended the improving trend towards the end of 2015, the international load factor dipped 1.8 percentage points to 41.3 percent, indicating yields are likely to come under further pressure, the industry body cautioned. “Despite this good start, the underlying weak trade performance makes it unlikely that growth will accelerate significantly in the coming months,” IATA said. Journal of Commerce www.harriswilliams.com PAGE | 1 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ MARCH 2016 M&A TRANSACTIONS RECENT M&A TRANSACTIONS1,2 Date Sector Target Business Description Acquirer 3/14/16* Logistics Coastal Pacific Xpress Provides refrigerated carrier services specializing in the shipping of Versacold International perishable and ambient products throughout the U.S. and Canada. Corporation 3/9/2016* Air Avjet Corporation Provides aircraft management and charter services. Jet Aviation AG 3/8/2016 Logistics Almacenes De Provides temperature controlled logistics solutions to manufacturers AGRO Merchants Group, Productos Congelados, and retailers. LLC Insofrisa S.A And 3/1/2016 Equipment Interstar Fleet Services Provider of emergency road service repair solutions for the TRAC Intermodal LLC intermodal and commercial trucking industries. 2/29/2016 Air Aero Express Logistics Provides air freight services in Singapore. Midnite Air Corp. Pte Ltd 2/11/2016 Logistics Advanced Distribution Provides manufacturing services and logistics services through cross Dicom Transportation Services docking facilities. Group, L.P. 2/9/2016 Logistics Gary Heer Transport Ltd. Provides refrigerated truckload hauling services. Versacold International Corporation 2/3/2016 Marine Alliance Supply Provides supply services for commercial and industrial shippers in the Ship Supply Of Florida, Inc. Management Ltd. U.S. Gulf of Mexico and South Eastern U.S. 2/2/2016 Marine Global Distribution and Provides various freight transportation services in the U.S. and Rockfarm Supply Chain Logistics LLC internationally. Solutions Inc. 1/14/2016 Logistics EZ Alternative Transport Provides bulk chemical hauling services. Heniff Transportation Systems 1/12/2016 Logistics Enroute Systems Provides SaaS transportation management systems. Pitney Bowes Inc. Corporation 1/11/2016 Logistics Consolidated Aviation Provides cargo handling services throughout the United States and Worldwide Flight Services, Services LLC South America. Inc. 12/29/2015* Logistics Sinotrans & CSC Holdings Provides integrated logistics solutions for customers in China and China Merchants Group Co. Ltd. internationally. Limited 12/9/2015 Logistics United Transportation Provides motor fuel delivery services. Sentinel Transportation LLC Co LLC, Motor Fuel Delivery Fleet 12/7/2015* Marine Neptune Orient Lines Owns and operates charter vessels and other related assets and CMA CGM S.A. Limited provides global cargo container transportation services. 12/2/2015 Equipment Polar Corporation Provider of high-quality tank trailers, parts, and related repair & American Industrial maintenance services. Partners 12/1/2015 Logistics Optimal Freight, LLC Provides truckload, less-than-truckload, intermodal, air, ocean, and Transport America, Inc. freight management services. 12/1/2015 Logistics Bear Transportation Provides less-than-truckload and truckload freight brokerage ABF Logistics II, Inc. Services, LP services. 11/18/2015 Logistics The Secor Group, Inc. Provides moving, storage, and logistics services. The Suddath Companies *Denotes pending transactions PAGE | 2 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ MARCH 2016 PUBLIC MARKETS OVERVIEW TEV / LTM EBITDA TEV / 2016E EBITDA Logistics Providers 9.2x Logistics Providers 8.6x Rail & Rail Services 8.0x Rail & Rail Services 8.0x Marine 7.9x Marine 7.0x Transportation Trucking 5.2x 5.3x Equipment Transportation 4.6x Equipment Trucking 5.0x AVERAGE REVENUE GROWTH (2012 – 2015E) AVERAGE REVENUE GROWTH (2015E – 2017P) Rail & Rail Services 7.3% Logistics Providers 5.7% Trucking 7.2% Trucking 3.7% Transportation Logistics Providers 5.2% 2.0% Equipment Transportation 4.3% Equipment Marine 0.5% Marine (2.8%) Rail & Rail Services (2.5%) AVERAGE EBITDA GROWTH (2012 – 2015E) AVERAGE EBITDA GROWTH (2015E – 2017P) Trucking 17.0% Logistics Providers 8.9% Rail & Rail Transportation 10.8% 7.4% Services Equipment Logistics 10.4% Trucking 4.7% Providers Transportation 3.7% Equipment Marine 2.6% Marine 2.9% Rail & Rail Services 1.7% PAGE | 3 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ MARCH 2016 STOCK PRICE PERFORMANCE MEDIAN % CHANGE (1 MONTH) MEDIAN % CHANGE (12 MONTH) Transportation Equipment 15.7% S&P 500 (2.5%) Logistics Providers 7.8% Logistics Providers (13.4%) Marine 7.4% Transportation Equipment (18.8%) S&P 500 7.3% Marine (24.7%) Rail & Rail Services 5.5% Rail & Rail Services (30.3%) Trucking 5.0% Trucking (40.4%) TRAILING TWELVE MONTHS (Indexed to March 10, 2015) 20% 10% 0% (10%) (20%) (30%) (40%) (50%) Mar-10-2015 Jun-10-2015 Sep-10-2015 Dec-10-2015 Mar-10-2016 Logistics Providers Trucking Rail and Rail Services Marine Transportation Equipment S&P 500 Index PAGE | 4 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ MARCH 2016 OUR GROUP Harris Williams & Co. is a leading advisor to the transportation