Arkansas Best Corp., the parent of less-than-truckload (LTL) carrier ABF Freight System Inc., said Thursday it has acquired Panther Expedited Services Inc. from private equity firm Fenway Partners LLC for $180 million in cash and debt.
The transaction gives Fort Smith, Ark.-based Arkansas Best a firmer foothold in the time-critical, or "expedited," logistics market. Panther, based in Seville, Ohio, is believed to be the second-largest player in the segment, behind FedEx Customs Critical, the expedited delivery unit of giant FedEx Corp.
Separately, ABF announced it would impose a 6.9-percent rate increase on shipments not moving under contract, effective June 25. The move matches an identical rate hike announced last week by FedEx Freight, another FedEx unit and the nation's largest LTL carrier by sales.
Under the transaction, Panther will operate as a wholly owned subsidiary of Arkansas Best and as a sister company to ABF. Andrew Clarke, Panther's president and CEO, will remain with Panther in the same role. All other members of the company's executive team are expected to remain as well, Arkansas Best said in a statement.
In 2011, Panther reported gross revenue—revenue before the cost of purchasing transportation—of $215 million. It reported a net loss of $3.4 million, but posted earnings before interest, taxes, depreciation, and amortization of $24 million.
Founded in 1992 as an asset-light expedited service provider with heavy exposure to the automotive industry, Panther has diversified over the years into other areas of logistics services. For example, Panther today has a significant presence in international freight forwarding, which was not the case 10 to 15 years ago.
Currently, the auto business accounts for about 22 percent of Panther's revenue, according to David G. Ross, transport analyst for investment firm Stifel, Nicolaus & Co.
Ross said that although Panther will remain a leader in the expedited market, most of its growth is likely to come from other segments of the logistics business. The company has about 11,000 customers worldwide.
Fenway acquired Panther in 2005 and in a statement Thursday characterized it as having been a "successful investment" for the firm.
EXPANDED PORTFOLIO
Panther is an "excellent strategic fit for our company and our customers as we seek to offer end-to-end logistics solutions
for progressively more complex supply chains," said Judy R. McReynolds, Arkansas Best's president and CEO, in a statement.
Clarke said in the same statement that although both companies offer expedited transport services, they have "different, complementary operating models and minimal customer overlap."
Michael P. Regan, chairman of TranzAct Technologies Inc., an Elmhurst Village, Ill.-based transport consultancy, applauded the move, saying the acquisition is a necessary step for ABF to broaden what had been largely a plain-vanilla portfolio.
Unlike rivals that have both regional and national trucking operations as well as expanding non-asset based logistics operations, "ABF is known just as a unionized longhaul carrier," Regan said. The Panther purchase dramatically expands ABF's value proposition, he added.
Regan said it would be interesting to see how ABF executes the integration of Panther, noting that the company, unlike some of its rivals, has chosen to expand organically rather than through acquisition. As a result, it has little experience incorporating another corporate culture into its system.
LABOR COMPLICATIONS
The Teamsters union, which represents about 7,500 ABF employees, may not be thrilled with the prospect of its parent
buying a non-union company, Ross surmised. However, there might be little labor backlash because the transaction presents
the potential for significant cross-selling opportunities and, if successful, should feed ABF's LTL network with new freight
and possibly create additional Teamster jobs, he added.
ABF and the Teamsters are gearing up to renegotiate a new National Master Freight Agreement to replace the pact that expires next year. In May 2010, the union rejected ABF's proposal for wage and benefits concessions similar to what had been agreed to by workers at YRC Worldwide, ABF's chief rival and the only other carrier that is party to the national contract. Later that year, ABF sued YRC and the union on grounds that the various concessions agreed to by YRC fell outside the province of the national contract and should be voided.
