www.mercercapital.com VALUE FOCUS Transportation & Logistics Second Quarter 2018 Fourth Quarter 2020 | Article: Seeking the Value of SEACOR In This Issue Seeking the Value of SEACOR 1 Industry Macro Trends 3 Trucking 7 Rail & Intermodal 10 M&A Activity 11 Select Transactions 12 Public Company Performance 15 Mercer Capital’s Value Focus: Transportation & Logistics Fourth Quarter 2020 FEATURE ARTICLE On December 7, 2020, publicly traded SEACOR Holdings announced that it had entered into an agreement with American Industrial Partners (AIP) to go private. The cash transaction, estimated to be worth slightly over $1 billion, is expected to Seeking the close during the first quarter of 2021. Other transportation companies in AIP’s portfolio include EnTrans International, LLC (bulk and energy transportation) and Rand Logistics (bulk freight shipping). Value of What is particularly notable about the SEACOR transaction is the premium AIP is paying for the company. The purchase SEACOR price of $41.50 per share is a premium of 14% relative to the December 4, 2020 trading price and reflects a premium of 31% over the 90-day volume-weighted average share price. The transaction also implies revenue and EBITDA multiples of 1.5x and 11.3x, respectively. For perspective, on December 31, 2020, the median enterprise value multiple for marine- based companies was 8.5x EBITDA and the median logistics company multiple was 8.3x. This indicates that AIP paid a significant control premium for SEACOR, possibly reflecting the additional value AIP will get from a strategic relationship with SEACOR. Publicly Traded Transportation Companies EBITDA Mulitple Trends 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 6/1/18 8/1/18 2/1/19 4/1/19 6/1/19 8/1/19 2/1/20 4/1/20 6/1/20 8/1/20 10/1/18 12/1/18 10/1/19 12/1/19 10/1/20 12/1/20 Truckload Less-than-Truckload Marine Rail Air Logistics © 2021 Mercer Capital // www.mercercapital.com 1 Mercer Capital’s Value Focus: Transportation & Logistics Fourth Quarter 2020 FEATURE ARTICLE As shown in the chart on the previous page, most segments of the transportation industry have experienced a decline in enterprise value to EBITDA multiples relative to 2018. The only segment that has experienced significant expansion in Seeking the EBITDA multiples has been railroad companies. Value of While no single transaction sets the market for all, transaction activity trends can provide important insight regarding val- uation. Whether it is two trucking lines merging to take advantage of complementary lanes, or a privately held company SEACOR installing an ESOP, or simply getting an offer that may just be too good to refuse from private equity, it’s important to keep in mind recent market trends and what they mean for the value of your company. (continued) Samantha L. Albert, ASA [email protected] | 901.322.9702 © 2021 Mercer Capital // www.mercercapital.com 2 Mercer Capital’s Value Focus: Transportation & Logistics Fourth Quarter 2020 Industry Macro Industrial Production Index (Seasonally Adjusted) Trends 115 Industrial Production Index 110 Demand for services in the logistics industry 105 is tied to the level of domestic industrial production. The Industrial Production Index 100 is an economic measure of all real output 95 from manufacturing, mining, electric, and gas utilities. The COVID-19 pandemic 90 resulted in numerous shutdowns and lock- downs that began in March 2020. Many 85 shutdowns and restrictions continued throughout 2020. Production recovered 80 during summer months, but uncertainties remained as the U.S. headed into winter Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 months. The index value in December Source: Federal Reserve Bank of St. Louis Indexed to 2012 2020 was 105.7, a 3% increase from the September 2020 value of 102.6, but down 3.6% on a year-over-year basis. The index in December 2020 increased 1.6% from November 2020. Production levels remain below historically observed levels and are 3% below the February 2020 index amount of 109.3. In the fourth quarter of 2020, materials, manufacturing, and consumer goods increased 9%, 11%, and 2.5%, respectively, relative to levels in the third quarter of 2020. © 2021 Mercer Capital // www.mercercapital.com 3 Mercer Capital’s Value Focus: Transportation & Logistics Fourth Quarter 2020 Industry Macro Transportation Services Index (Freight, Seasonally Adjusted) Trends 150 140 Transportation Services 130 Index 120 110 The Transportation Services Index, which 100 measures freight traffic in the United States, 90 increased in December 2020, relative to the prior month but was slightly down on 80 a year-over-year basis. The index rose to 136.3, up 0.8% from 132.7 in November Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 2020, reaching pre-COVID levels (the index Source: Bureau of Transportation Statistics Indexed to January 2000 was at 136.0 in February 2020). The index declined 0.2% on a year-over-year basis. Cass Freight Index Cass Freight Index 3.5 The Cass Freight Index of shipments and 3.0 expenditures is considered one of the best 2.5 indicators of overall U.S. freight activity. In April 2020, shipments fell to their lowest levels 2.0 since January 2010 due to COVID-19 related 1.5 shutdowns in the U.S. and abroad. By the 1.0 end of September 2020, both the shipments and expenditures indices had surpassed Feb- 0.5 ruary 2020 levels. Both indices continued to grow in the fourth quarter and both posted Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 growth on a year-over-year basis. Shipments Expenditures Source: Cass Information Systems, Inc. and Avondale Partners Indexed to January 1990 © 2021 Mercer Capital // www.mercercapital.com 4 Mercer Capital’s Value Focus: Transportation & Logistics Fourth Quarter 2020 Industry Cass Freight Shipments Index Macro Trends 1.40 1.30 Shipments 1.20 Shipments in December 2020 increased 6.7% relative to December 2019. After 22 1.10 months of declines on a year-over-year basis, the shipments index has posted 1.00 positive year-over-year gains for three 0.90 straight months. The Cass report expects Jul January 2021 growth on the order of 5.5%. Jan Feb Mar Apr May Jun Aug Sep Oct Nov Dec 2016 2017 2018 2019 2020 Indexed to January 1990 Source: Cass Information Systems, Inc. and Avondale Partners © 2021 Mercer Capital // www.mercercapital.com 5 Mercer Capital’s Value Focus: Transportation & Logistics Fourth Quarter 2020 Industry Cass Freight Expenditures Index 3.20 Macro Trends 3.00 Expenditures 2.80 The expenditures index measures the total 2.60 amount spent on freight. The expenditures index hit 3.077 in December 2020, an 2.40 increase of 6.5% on a quarterly basis and an increase of 3.6% on a monthly 2.20 basis. December 2020 marked the fourth 2.00 straight month of year-over-year, growing Jul 13% relative to December 2019. The May Jan Feb Mar Apr May Jun Aug Sep Oct Nov Dec 2020 Expenditures Index was the lowest 2016 2017 2018 2019 2020 recording since January 2016. The Cass Indexed to January 1990 Report indicated that lower fuel prices Source: Cass Information Systems, Inc. and Broughton Capital have offset index gains. Reduced capacity combined with higher levels of consumer consumption are serving to drive up rates. © 2021 Mercer Capital // www.mercercapital.com 6 Mercer Capital’s Value Focus: Transportation & Logistics Fourth Quarter 2020 Trucking Truck Tonnage (Seasonally Adjusted) Truck Tonnage 130 The American Trucking Association (ATA) estimates trucking accounts for over 70% 120 of all domestic freight tonnage and over 80% of total freight expenditures. The truck 110 tonnage index ended 2020 at 116.7, slightly higher than its reported levels in December 2019 but 0.3% lower than Pre-COVID levels 100 adjusted Tonnage in February 2020. The index has had a - generally upward trend since the initial 90 COVID related drop in March 2020. Seasonally 80 70 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Source: Bureau of Transportation Statistics Indexed to 2015 © 2021 Mercer Capital // www.mercercapital.com 7 Mercer Capital’s Value Focus: Transportation & Logistics Fourth Quarter 2020 Trucking Spot vs. Contract Rates $2.85 Spot vs. Contract Rates The Spot vs. Contract Rates charts depicts $2.65 monthly national average line haul rates and $2.45 fuel surcharges from DAT. Shippers enter contracts that lock in a static contract rate $2.25 for a period of time. Spot rates, on the other hand, are one-time shipping quotes for a $2.05 specific transaction or series of transactions. $1.85 As capacity has tightened during 2020, spot rates have eclipsed contract rates in the $1.65 reefer and dry van categories; spot rates continue to lag contract rates in the flatbed $1.45 market. Dec Jan Feb Ma r Apr Ma y Jun Jul Aug Sep Oct Nov Dec 2019 2020 All classes of rates increased during the third quarter and all classes except for Reefer Spot Flatbed Spot Dry Van Spot Reefer Contract Flatbed Contract Dry Van Contract reefer contract increased on a year-over- Source: DAT year basis.