TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ JUNE 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 7078852. 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 │ JUNE 2017 WHAT WE’RE READING CONTENTS LOGISTICS | FORTUNE 500 HIGHLIGHTS E-COMMERCE LOGISTICS IMPACT . M&A TRANSACTIONS This year’s Fortune 500 list of largest US publicly owned companies, released June . PUBLIC MARKETS OVERVIEW 7, underscores a growing rift in the transportation sector: Those companies . STOCK PRICE PERFORMANCE involved in e-commerce, last-mile delivery, and supply-chain solutions continue to . OUR GROUP grow faster than traditional freight-moving competitors. That is a sign of the growing impact of what is been called the “Amazon Effect” on distribution and order fulfillment, and greater specialization in last-mile and dedicated transportation. It also reaffirms those more dependent on traditional freight CONTACTS markets suffered as those markets stagnated in 2016. That shift is likely to touch more of the Fortune 500 transport operators in 2017. UNITED STATES Journal of Commerce Frank Mountcastle TRUCKING | TRUCKERS STRUGGLE WITH CHOPPY FREIGHT DEMAND Managing Director [email protected] Freight demand has not been as robust as executives expected. While freight +1 (804) 915-0124 volumes and rates are rising modestly, more freight is being diverted through e- Jason Bass commerce channels. That’s to the chagrin of traditional truckload haulers, as Managing Director online shopping and "free shipping" continue to grow. Some evidence for an [email protected] overall freight buildup comes from the Cass Freight Index, a barometer of freight +1 (804) 915-0132 demand and expenditures. It rose 3.7 percent in April from March and 4 percent Joe Conner on a year-over-year. Spot market dry van truckloads also rose in May, before the Managing Director Memorial Day holiday. The Cass Shipper Expenditures Index rose 3.1 percent from [email protected] March and 6 percent from a year ago, reflecting in part higher fuel surcharges. +1 (804) 915-0151 Logistics Management Jeff Burkett Director [email protected] MARINE | MERGERS, MEGA-SHIPS WEIGH ON PORT PROFITS +1 (804) 932-1334 The forecasted 4 percent growth in global container terminal throughput in 2017 is Jershon Jones expected to hold into 2018 on the back of a strengthening global economic Director outlook led by the United States and emerging markets, according to shipping [email protected] consultants Drewry, but ports and terminal operators expect less shipping lines and +1 (804) 932-1356 greater infrastructure demands will be a drag on profits. Throughput at a sample of Jeff Kidd global ports selected by the London-based company grew by 3.6 percent year Vice President over year in the first quarter, a significant pick up from the 2.1 percent achieved in [email protected] the final quarter of 2016. +1 (804) 915-0178 Journal of Commerce James O’Malley Vice President [email protected] RAIL | RAIL FREIGHT POSTS STEADY GAINS +1 (804) 915-0165 Energy carloads showed two sides of the same coin for the week of June 10 as coal continued to climb while petroleum shipments were weaker on-year. Total U.S. weekly rail traffic was 545,317 carloads and intermodal units, up 6.2% for the week ending June 10 compared with the same week in 2016, according to the EUROPE Association of American Railroads. Traffic totaled 265,717 carloads, up 7.1%, while intermodal volume was 279,600 containers and trailers, up 5.3%. Jeffery Perkins RailwayAge Managing Director [email protected] +49 (0) 69 3650638 00 AIR | AIRPORTS AROUND THE WORLD REGISTER STRONG FIRST-QUARTER More evidence is in that air freight demand has turned the corner, and the question now is how long the demand will last. Airports Council International (ACI), the trade association of the world’s airports registered freight volumes rising by 8.3 percent, year-over-year in the first quarter of 2017 and 10.9 percent for the month of March. Rising demand for airfreight increased in conjunction with an increase in export orders and inventory build-ups in key markets. Air Cargo World www.harriswilliams.de PAGE | 1 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ JUNE 2017 M&A TRANSACTIONS(1,2,3) RECENT M&A TRANSACTIONS Date Sector Target Business Description Acquirer 6/16/2017 Logistics Worthington Logistics Provides freight brokerage services. GlobalTranz Enterprises Solutions Inc. 6/15/2017 Logistics Partner Logistics Operates six cold storage facilities in the UK, Netherlands and Lineage Logistics, LLC Belgium. 6/13/2017 Marine Stewart & Stevenson Designer, manufacturer and distributor of specialized equipment for Kirby Corporation the oil and gas, marine, construction, power generation, transportation, mining and agricultural industries. 6/2/2017 Logistics Dedicated Logistics Provides warehousing services under Radiant’s Service by Air brand. Radiant Logistics, Inc. Technologies 5/30/2017 Trucking Estenson Logistics Provides dedicated contract transportation services. Hub Group, Inc. 5/30/2017 Equipment DexKo Global Manufactures trailer and chassis components. KPS Capital 5/16/2017 Logistics Logistics Planning Provides freight brokerage services. GlobalTranz Enterprises Services Inc. 5/9/2017 Logistics Dicom Transportation - Provides comprehensive warehousing and related delivery services. St. George Logistics Extra Express Division 5/3/2017 Equipment Truck Bodies and Manufactures dump bodies, landscape bodies, grain bodies, Federal Signal Equipment International, platforms, hoists, and truck and trailer equipment and accessories. Corporation Inc. 5/3/2017 Logistics Nightline Logistics Group Provides express delivery services in Ireland. United Parcel Service, Inc. 5/3/2017 Logistics Carelog Freight Services Provides freight forwarding and logistics services focusing the Panalpina World Transport A/S furniture and fashion industry in Denmark. Ltd. 5/3/2017 Logistics Air Connection Provides freight forwarding services in Kenya. Panalpina World Transport Ltd. 5/2/2017 Air GAT Airline Ground Provides outsourced airline services at airports across the United Atlantic Street Capital Support, Inc. States. 5/1/2017 Trucking Big Freight Systems Inc. Provides trucking services in Canada. Daseke, Inc. 5/1/2017 Trucking Schilli Companies Provides trucking services in Indiana. Daseke, Inc. 4/24/2017 Marine Orion Marine Provides project steamship agent and broker services. OL International Holdings Corporation LLC 4/24/2017 Rail Semvac Supplier of sanitary systems to the railway industry. Wabtec Corporation 4/24/2017 Logistics Masterpiece Provides customs brokerage and international logistics services. Magnate Worldwide, LLC International 4/21/2017 Logistics Transportation Provides training, certification, consulting, regulatory, compliance, Hallcon Corporation Certification Services, and staffing for the transit and rail industries. Inc. *Denotes minority investment PAGE | 2 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ JUNE 2017 PUBLIC MARKETS OVERVIEW(1) TEV / LTM EBITDA TEV / 2017E EBITDA Rail & Rail Services 11.2x Rail & Rail Services 10.6x Logistics Providers 10.1x Logistics Providers 9.1x Marine 9.6x Marine 8.6x Transportation Transportation 8.5x 7.7x Equipment Equipment Trucking 7.3x Trucking 6.7x AVERAGE REVENUE GROWTH (2013 – 2016) AVERAGE REVENUE GROWTH (2016 – 2018P) Logistics Providers 7.8% Transportation Equipment 4.7% Marine 7.3% Logistics Providers 4.2% Trucking 4.4% Trucking 2.6% Transportation 4.2% Rail & Rail Services 2.1% Equipment Marine (4.3%) Rail & Rail Services (0.5%) AVERAGE EBITDA GROWTH (2013 – 2016) AVERAGE EBITDA GROWTH (2016 – 2018P) Transportation Transportation 19.4% 14.1% Equipment Equipment Rail & Rail Services 6.0% Logistics Providers 12.1% Logistics Providers 5.3% Trucking 9.4% Trucking 4.4% Rail & Rail Services 3.3% Marine (4.3%) Marine 3.3% PAGE | 3 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ JUNE 2017 STOCK PRICE PERFORMANCE(1) MEDIAN % CHANGE (1 MONTH) MEDIAN % CHANGE (12 MONTH) Trucking 7.5% Transportation Equipment 39.1% Rail & Rail Services 3.3% Rail & Rail Services 18.2% Logistics Providers 1.6% S&P 500 14.8% S&P 500 1.4% Trucking 11.8% Transportation Equipment 0.5% Logistics Providers 11.6% Marine (12.4%) Marine (9.2%) TRAILING TWELVE MONTHS (Indexed to June 8th, 2016) 50% 40% 30% 20% 10% 0% (10%) (20%) (30%) Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Logistics Providers Trucking Rail and Rail Services Marine Transportation Equipment S&P 500 Index PAGE | 4 TRANSPORTATION & LOGISTICS INDUSTRY UPDATE │ JUNE 2017 OUR GROUP Harris Williams & Co. is a leading advisor to the transportation and logistics M&A market. 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