Greatwide Logistics Services LLC and Cardinal Logistics Management Corp. yesterday announced a merger that creates a $1 billion-a-year logistics entity with aspirations of becoming a major player in the dedicated contract carriage segment of U.S. trucking.
Under the transaction, Dallas-based Greatwide's dedicated trucking operations, which make up the largest share of its business, will be merged into Concord, N.C.-based Cardinal. Three other Greatwide units will operate on a standalone basis.
The merger combines Greatwide's capabilities in supporting longer-haul, large-fleet requirements with Cardinal's niche in "last-mile delivery," which in the logistics field is defined as either from distribution center to the retail store, from the store to the customer or, in some cases, direct-to-customer.
Under the new management structure, John Tague, who joined Greatwide as CEO in 2011 after serving as president of United Airlines, will be chairman and CEO. Vin McLoughlin, who co-founded Cardinal in 1997 as a trucking company, will be vice chairman. Centerbridge Partners LP, a New York-based private equity firm, will be the majority owner of the combined enterprise. Centerbridge along with investment firm D.E. Shaw Group acquired Greatwide in February 2009; it also has an investment in Cardinal.
The merger combines firms with strong positions in the dedicated category, where a trucker dedicates equipment and drivers to serving an individual shipper and allows the customer to lock in rates and capacity with the carrier for a multi-year period. The standard dedicated contract runs three to five years and usually requires the customer to compensate the provider for an agreed-upon number of miles driven on a round-trip basis.
Companies with enough freight to justify round-trips&mash;often from distribution centers to stores and back&mash;may find dedicated a better value proposition than paying for one-way truckload service. A dedicated option is considered more viable in cycles of tightening rig and driver capacity because shippers want the assurance of capacity at predictable rates.
The companies have been discussing the possibility of a deal for some time, according to a source familiar with the talks. A key objective of the transaction is to reduce the amount of dedicated capacity currently on the roads, the source said.
According to the statement from Cardinal announcing the deal, Greatwide is the largest for-hire provider of dedicated refrigerated transportation in the United States. The statement did not mention if money changed hands, where the new company would be located, or what the company's name would be.
In October 2008, Greatwide filed for protection under Chapter 11 of the federal bankruptcy code. It emerged from bankruptcy protection in March 2009, and the following year launched a major rebranding to broaden its customer base beyond the nation's largest shippers and simplify its operating structure.
Cardinal exited the common carriage business in 2001 when it sold its van operations to Phoenix-based Swift Transportation Co.