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Home » Covenant's acquisition of Landair deepens exposure to dedicated contract carriage space
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Covenant's acquisition of Landair deepens exposure to dedicated contract carriage space

July 6, 2018
DC Velocity Staff
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Covenant Transportation Group, Inc.'s $83 million acquisition of dedicated contract carriage and third-party logistics (3PL) provider Landair Holdings demonstrated that in a hot trucking market it may be necessary to buy and quickly ramp up expanded capabilities rather than try to grow them in-house.

The cash and debt acquisition of Greeneville, Tenn.-based Landair will vault Chattanooga-based Covenant higher into the ranks of providers in the dedicated business, today one of the fastest growing segments of trucking. Dedicated accounted for about $60 million of Landair's fiscal 2017 total revenue of $121 million, it said. About $41 million came from managed transportation, and the rest from one-way, irregular-route truckload operations. Covenant reported first quarter revenue of $150.4 million, excluding the impact of fuel surcharges. It does not publicly break out revenue by service category.

Landair operates about 430 trucks and 900 trailers. It also manages 12 distribution centers covering approximately 1.8 million square feet.

John Tweed will continue as Landair's president, and the company will keep its current headquarters, Covenant said yesterday in a statement announcing the deal. The results of Landair's transport unit will be folded into Covenant's truckload segment, while the results of Landair's logistics division will be reported within Covenent's managed freight segment.

David R. Parker, Covenant's chairman and CEO, said the company pursued Landair because of its "proven record of growth and profitability" in the dedicated and 3PL markets. Landair is a perfect fit with our strategy to grow in areas where we can get closer and more heavily integrated with customers," Parker added.

Demand for dedicated services, where a shipper outsources its fleet operations for a multi-year period to a specialist that dedicates rigs, trailers and drivers for the shipper's sole use, has increased significantly in the past year as shippers seek capacity assurance in a tight truckload market. According to a report published last month by consultancy Armstrong & Associates, Inc., 2017 gross revenues—revenues before the cost of purchased transportation--from dedicated services rose to $15.6 billion, up 10.2 percent from 2016 levels and much higher than the 7.5 percent compound annual growth rate reported for the segment since 1995.

Last month's annual State of Logistics Report, prepared by consultancy A.T. Kearney Inc. for the Council of Supply Chain Management Professionals (CSCMP) and presented by third-party logistics provider Penske Logistics, said users paid 9.5 more for dedicated contract carriage services in 2017 than they did in the prior year

The Landair deal is the largest in Covenant's 32-year history.

Trucking Truckload
KEYWORDS Armstrong & Associates Council of Supply Chain Management Professionals Covenant Transport Inc. Kearney La Poste Penske Logistics
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