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Transportation & Logistics Industry Report TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ FEBRUARY 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 │ FEBRUARY 2015 WHAT WE’RE READING CONTENTS LOGISTICS | DELIVERING WITH DATA: HOW LOGISTICS COMPANIES ARE SHIPPING… . M&A TRANSACTIONS With the immediacy technology has brought to life, customer service expectations . PUBLIC MARKETS OVERVIEW are at an all-time high. No industry is immune from those expectations, including . STOCK PRICE PERFORMANCE the logistics industry, where delivery services face greater pressure to get packages to their destination in the most timely and efficient way possible. This . OUR GROUP rang true over the 2014 holiday season, when trends such as omnichannel retailing and same-day delivery pressured carriers to improve delivery systems or risk losing customers. Forbes CONTACTS TRUCKING | DRIVER SHORTAGE MAKES CAPITALIZING ON LOW OIL HARD… UNITED STATES A chronic shortage of drivers means America's long-haul trucking companies are Frank Mountcastle struggling to capitalize on cheap fuel prices that could allow them to take goods Managing Director shipments away from railroads. A 50 percent fall in oil prices from their peak last [email protected] year should have erased some of the cost advantage railroads enjoy, especially +1 (804) 915-0124 for longer hauls. But for customers hoping to save money by switching from train to Jason Bass truck, the lack of drivers makes that harder. Managing Director Reuters [email protected] +1 (804) 915-0132 RAIL | IANA OFFERS BRIGHT FORECAST FOR 2015 INTERMODAL GROWTH Joe Conner Managing Director Neither U.S. West Coast port congestion nor the East Coast winter weather could [email protected] stop intermodal volume growth in 2014 and they won’t be able to this year either, +1 (804) 915-0151 the Intermodal Association of North America says. Intermodal volume increased Jeff Burkett 4.8 percent in 2014 and will likely see similar-sized gains this year, thanks in large Director part to a boost in consumer spending driven by plunging oil prices and a [email protected] strengthening U.S. dollar. +1 (804) 932-1334 Journal of Commerce Jershon Jones Director RAIL | FOR 2015, FREIGHT RAIL WILL CARRY THE ECONOMY [email protected] +1 (804) 932-1356 The U.S. economy continues to grow, and strong demand for rail service demonstrates that the freight rail industry is integral to this growth. By providing Jeff Kidd cost-effective transportation of goods, from lumber to oil to auto parts, freight rail is Vice President [email protected] playing a central role in positive economic trends — including rising gross domestic +1 (804) 915-0178 product, improving employment statistics and low gasoline prices. In 2015, the nation’s major freight railroads plan to spend an estimated $29 billion — which would set an annual record — to build, maintain and grow the rail network. EUROPE AAR Jeffery Perkins MARINE | CARRIER ON-TIME RELIABILITY PLUNGES TO NEW LOW AS RATES RISE Managing Director [email protected] +49 (0) 69 3650638 00 U.S. West Coast port congestion and the phasing in of major shipping alliances pulled global carrier reliability to a record low, adding an extra sting to rising rates hitting shippers, according to Drewry’s most recent Carrier Performance Insight report. The sliver of good news in the report, released Sunday, is that Drewry expects carrier reliability to improve in the coming months, as “new alliance services settle down and each carrier group seeks to make their new services more attractive to customers.” Journal of Commerce AIR | AIR CARGO ENDS 2014 ON A POSITIVE NOTE The International Air Transport Association (IATA) released full-year air cargo data for 2014 showing 4.5% demand growth compared to 2013 measured by freight tonne kilometers (FTKs). That is a significant acceleration from the 1.4% recorded in 2013 over 2012. Air cargo market expansion gathered momentum as 2014 progressed. The year finished on a positive note, with growth in December accelerating to 4.9%, compared to December 2013. IATA www.harriswilliams.com PAGE | 1 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ FEBRUARY 2015 M&A TRANSACTIONS RECENT M&A TRANSACTIONS1,2 Date Sector Target Business Description Acquirer Pending Logistics Toll Holdings Limited Provides integrated logistics services in the Asia-Pacific region and Japan Post Bank Co., Ltd. internationally. Pending Logistics APL Logistics Ltd Provides global supply chain and logistics services across all modes Kintetsu World Express, of transportation. Inc. Pending Trucking CLP Towne Inc. Doing business as Towne Air Freight. Provides full-service trucking Forward Air, Inc. solutions and specializes in time-definite airport-to-airport trucking. Pending Logistics Wheels Group Inc. Provides third party logistics and supply chain solutions in North Radiant Global Logistics America. Pending Logistics Charter Brokerage LLC Non-asset based third party logistics provider to the petroleum and Berkshire Hathaway Inc. chemical industries. Pending Marine Horizon Lines, Inc. Engages in Jones Act container shipping with primary service to ports Matson Navigation within the continental United States, Alaska, Hawaii, and Puerto Rico. Company, Inc. Pending Logistics Neovia Logistics Provides third party contract logistics services, including warehouse The Goldman Sachs Group Services, LLC management, fulfillment, and distribution solutions. Rhone Capital L.L.C. 2/9/2015 Logistics UX Specialized Logistics Provides non-asset based, last mile logistics services including home XPO Last Mile, Inc. delivery, assembly and installation, and same-day delivery. 2/5/2015 Logistics Xpress Solutions, Inc. Provides non-asset based less-than-truckload and truckload solutions Echo Global Logistics, Inc. with a regional focus in the Midwest. 2/4/2015 Rail Railroad Controls Limited Provides railroad signal construction services to the freight and Westinghouse Air Brake commuter rail industry. Technologies Corporation 2/2/2015 Logistics Lazer Spot, Inc. Provides outsourced yard management services including trailer Greenbriar Equity Group spotting and shuttling. 2/2/2015 Logistics PODS Enterprises, Inc. Provides container-based moving and storage services. Ontario Teachers' Pension Plan 2/2/2015 Logistics Linkex, Inc. Provides asset-light, third party logistics services including supply Saia, Inc. chain design, transportation, warehousing, and last mile solutions. 1/30/2015 Logistics GENCO Distribution Provides product lifecycle and reverse logistics solutions in North FedEx Corporation Systems, Inc. America and internationally. 1/26/2015 Marine Cronos Ltd. Provides intermodal marine container leasing services. Bohai Leasing Co., Ltd. 1/26/2015 Trucking Taylor Express, Inc. Provides regional dry van, dry bulk for-hire, and dedicated truckload Celadon Group Inc. services. 1/9/2015 Trucking Gardewine Group Inc. Provides regional less-than truckload, truckload, and specialized Mullen Group Ltd. truckload services primarily in Manitoba and Ontario. 1/5/2015 Logistics Freightquote.com, Inc. Largest provider of online freight brokerage services in the United C.H. Robinson Company, States. Inc. PAGE | 2 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ FEBRUARY 2015 PUBLIC MARKETS OVERVIEW TEV / LTM EBITDA TEV / 2015P EBITDA Logistics Providers 11.5x Logistics Providers 10.6x Rail & Rail Services 11.3x Rail & Rail Services 9.5x Marine 10.5x Marine 8.2x Trucking 8.4x Trucking 7.1x Transportation Transportation 8.1x 6.2x Equipment Equipment AVERAGE REVENUE GROWTH (2011 – 2014E) AVERAGE REVENUE GROWTH (2014E – 2016P) Rail & Rail Services 11.8% Trucking 6.7% Trucking 9.8% Logistics Providers 6.3% Transportation 8.7% Marine 6.2% Equipment Transportation Logistics Providers 7.6% 5.8% Equipment Marine 6.0% Rail & Rail Services 5.5% AVERAGE EBITDA GROWTH (2011 – 2014E) AVERAGE EBITDA GROWTH (2014E – 2016P) Rail & Rail Services 18.8% Trucking 14.9% Trucking 12.9% Logistics Providers 11.2% Marine 9.0% Marine 10.9% Transportation Transportation 8.5% 10.8% Equipment Equipment Logistics Providers 7.9% Rail & Rail Services 10.6% PAGE | 3 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ FEBRUARY 2015 STOCK PRICE PERFORMANCE MEDIAN % CHANGE (1 MONTH) MEDIAN % CHANGE (12 MONTH) Transportation 12.6% Rail & Rail Services 24.3% Equipment Rail & Rail 10.7% Trucking 21.6% Services Marine 4.2% Logistics Providers 15.0% Logistics Transportation 4.2% 13.3% Providers Equipment Trucking 2.5% Marine (9.3%) TRAILING TWELVE MONTHS (Indexed to February 18, 2014) 40% 30% 20% 10% 0% (10%) (20%) (30%) 2/18/14 5/18/14 8/18/14 11/18/14 2/18/15 Logistics Providers Trucking Rail & Rail Services Marine Transportation Equipment S&P 500 Index PAGE | 4 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ FEBRUARY 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. RECENTLY CLOSED
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