Heartland Express Inc. said late yesterday that it acquired privately held Gordon Trucking Inc. in a $300 million deal that will create North America's fifth-largest truckload carrier and expand Heartland's presence in the western United States.

Heartland, based in North Liberty, Iowa, will finance the acquisition with $165 million in cash and the balance in stock and debt. The combined company will have about $1 billion in annual revenue and terminal operations from coast to coast, Heartland said.

Based in Pacific, Wash., Gordon's network is strongest in the U.S. West. It operates in five western states and has large footprints in California, Washington, Oregon, and Idaho. Heartland said its locations do not overlap with Gordon's.

Prior to the transaction, Hartland generated about 18 percent of its annual revenue from western U.S. operations, according to data from Robert W. Baird & Co., an investment firm. With Gordon in the fold, that percentage will jump to 42 percent of revenue, said Benjamin J. Hartford, Baird's lead transport analyst.

Gordon was founded in 1946 by Jay Gordon and was initially called Gordon Fast Freight. In 1984, Gordon sold the company to his son Larry and Larry's wife Virginia. Today, Larry and Virginia Gordon co-own the company with their sons Steve and Scott. The Gordons plan to retire, while their sons will join Heartland. In the 12 months ending Sept. 30, Gordon generated $20 million in operating income on $433 million in total revenue.

The Gordon acquisition is Heartland's fifth purchase since 1987 and its first since 2002.

CONTINUING CONSOLIDATION?
The transaction is the latest stab at consolidation in the extremely fragmented $500-billion-a-year U.S. truckload market. Swift Transportation Inc., the largest carrier by truckload revenue, controls only 2.4 percent of market share, according to Baird data. The second largest, Schneider National Inc., controls about 1.8 percent of the market, according to Baird. Schneider pulls in significant additional revenue from other sources such as logistics and intermodal.

Truckload carriers face continuing pressure from higher labor and equipment costs, slower demand growth, and increased regulation.

In September, truckload carrier Knight Transportation made an unsolicited $242 million offer for rival USA Truck Inc. USA Truck's board rejected the offer as too low, setting up what could be a hostile takeover attempt by Knight.