Transportation & Logistics Q3 2019

Transportation and Logistics Q3 2019

M&A Transaction Trends

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)

Source S&P Capital IQ as of 10/10/2019 and PCE Proprietary Data

M&A Industry Trends

U.S.-China Trade Tensions Impact Shipping and Traffic

Ongoing U.S.-China trade tensions have created strategic shifts in the shipping sector, while aircraft safety concerns have impacted air and airport traffic. West Coast ports experienced monthly volume volatility, as East Coast ports experienced volume increases of nearly 6% over the last three months, as shippers attempt to beat tariff deadlines. Growth prospects for ocean and air cargo are projected to remain healthy into 2020, though both segments’ trajectories are forecast to level off. The latest U.S.-China negotiations yielded a Chinese compromise on food imports, preventing a 5% U.S. tariff increase scheduled for October 15.1, 2, 3, 4

Cost of Oil up Since September Drone Attack

As September drone attacks at a major Saudi oil facility caused a temporary export shortfall, oil supply concerns provoked Asian countries to diversify suppliers and beef up stockpiles. The U.S., with sufficient production and port capacity, was able to respond to the increased demand. VLCC (very large crude carriers) rates from the U.S. to both Asia and Europe have skyrocketed, increasing per barrel costs up to $5 per barrel.5, 6

Boeing CEO to Testify About 737 MAX Safety Concerns

On October 30, Boeing CEO Dennis Muilenburg will testify before the House Committee on Transportation and Infrastructure, as Boeing continues to cooperate with Congress and regulatory authorities. The hearing will include an interview and evidence from a Boeing engineer stating that the Company’s focus on cost control and deadlines prevailed over safety concerns. 737 MAX service in EU airspace has been delayed as a result of the EU aviation regulator’s determination that FAA and Boeing officials have not sufficiently demonstrated the efficacy of the reconfigured MAX flight control computers. The 737 MAX is scheduled to return to service in the U.S. in early 2020, although further delay of its operation in Europe is expected, creating additional complexity to the airplane’s usage. A panel of U.S. and foreign air safety experts criticized Boeing and FAA for errors leading to two plane crashes earlier this year.7, 8, 9, 10

Uber Continues to Expand Offerings with Uber Freight

Expanding beyond ride-hailing, Uber is set to launch Uber Freight, to compete with traditional freight transport companies. The company will spend $200 million annually on this initiative, and expects to hire 2,000 employees in the Chicago region over the next three years. The disruption also impacts truck-brokerage, where legacy player C.H. Robinson Worldwide Inc., the largest north American freight broker, will spend $1 billion to expand its tech tools over the next five years in hopes of competing. Uber also purchased a majority stake in grocery delivery company Cornershop, adding to its food-delivery service offerings.11, 12, 13

Industrial Rents Expected to Plummet

The rise of e-commerce has vaulted industrial buildings into one of real estate’s hottest sectors, but the slowing economy and trade dispute between the U.S. and China may threaten the boom in warehouse rents. Industrial rents are projected to decline 62% over the next two years, as the segment is heavily exposed to unsteady manufacturing, tariffs, and international trade concerns.14

Amazon Sets Eyes on Carbon Neutrality

Amazon CEO Jeff Bezos said Amazon plans to be carbon neutral by 2040, meeting Paris climate agreement goals ten years early. The Company will purchase 100,000 electric delivery vehicles from Detroit-based electric-vehicle startup Rivian Automotive to reduce carbon emissions, planning to have 10,000 electric vehicles operational by 2022. Amazon led a $700 million financing round in Rivian earlier this year.15

E-Commerce Companies Focus of Fulfillment Centers, Adding Competition for Amazon

As fulfillment providers automate operations to speed shipping, suppliers of online retailers are consolidating, driving warehouse construction. Earlier this year, e-commerce technology company Shopify rolled out a service offering customers access to dedicated U.S. fulfillment centers, helping retailers compete against Amazon. Shopify is also investing $450 million to purchase warehouse robot-maker 6 River Systems Inc.16, 17

Historical World Trade Organization Ruling Finds Airbus at Fault 

The World Trade Organization (WTO) ruled against Airbus for receiving 15 years of illegal European Union subsidies, allowing the U.S. to impose 10% levies on European aircraft and 25% duties on $7.5 billion of agricultural and industrial products as retribution, beginning October 18. The decision is the largest in WTO history, and broaches a potential trade war with the E.U.18

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Largest M&A Transactions Closed

Target Buyer Value($mm)
Millis Transfer, Inc. Heartland Express, Inc. $150.00
Winchester & Western Railroad Company, Inc. OmniTRAX, Inc. $105.00
Pioneer Railcorp, Inc. Stephens Capital Partners LLC; Related Infrastructure; Brookhaven Rail Partners, LLC $72.43
Global Aviation Services, LLC PrimeFlight Aviation Services, Inc. $25.00
Wan Hai Lines (America) Ltd. - $13.81
Ritter Transportation Systems, Inc./Ritter Transport, Inc. EVO Transportation & Energy Services, Inc. $13.74
Courtlandt and Brown Enterprises LLC/Finkle Transport Inc. EVO Transportation & Energy Services, Inc. $12.00
Johmar Leasing Company, LLC EVO Transportation & Energy Services, Inc. $3.85
Substantially All Assets of Auto Strap Transport L.L.C. Nations Fund I, LLC $3.10

Source S&P Capital IQ as of 10/10/2019 and PCE Proprietary Data

Additional Resources

Keys to Selling Your Transportation Business eBook

Contacts

Woody Whitcomb

 

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Michael Rosendahl

 

Michael Rosendahl

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Data Assumptions

This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

Glossary

EBIT - Earnings Before Interest and Taxes
EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
LTM - Last Twelve Months
TEV - Total Enterprise Value

Sources:

  1. Ip, Greg, “Oil Spikes, Auto Strikes Join List of Supply Shocks,” The Wall Street Journal, Sept. 18, 2019.
  2. Burnson, Patrick, “U.S. Transportation Growth Likely to Hit Plateau,” Logistics Management, October 8, 2019.
  3. Mauldin, William, Deng, Chao and Restuccia, Andrew, “U.S.-China Trade Talks Begin on Positive Note,” WSJ, October 10, 2019.
  4. Mauldin, William, Deng, Chao and Salama, Vivian, “U.S., China Reach Truce on Trade,” WSJ, October 12-13, 2019.
  5. Paris, Costas, “Tanker Operators Look to U.S. to Replace Saudi Oil Cargoes,” The Wall Street Journal, Sept. 17, 2019.
  6. Dezember, Ryan, “Oil Shipping Costs Surge, Threatening U.S. Exports,” The Wall Street Journal, October 4, 2019.
  7. Root, Al, “October Could Be a Make-or-Break Month for Boeing,” Barron’s, Sept. 18, 2019.
  8. WSJ Pro, “Auto & Transport Roundup: Market Talk,” The Wall Street Journal, July 12, 2019.
  9. Tangel, Andrew and Pasztor, Andy “Boeing Prioritized Costs Over Safety, Engineer Alleges,” Wall Street Journal October 2, 2019.
  10. Pasztor, Andy and Tangel, Andrew, “Friction Between U.S., European Regulators Could Delay 737 MAX Return to Service,” The Wall Street Journal, Oct. 8, 2019.
  11. Smith, Jennifer, “C.H. Robinson Worldwide to Double Spending on Freight Technology,” The Wall Street Journal, Sept. 18, 2019.
  12. Smith, Jennifer, “Uber Seeks to Build Up Freight Business,” The Wall Street Journal, Sept. 17, 2019.
  13. Haddon, Heather and Chin, Kimberly, “Uber to Acquire Majority Stake in Grocery-Delivery Service Cornershop,” The Wall Street Journal, Oct. 11, 2019.
  14. Putzier, Konrad, “E-Commerce Made Warehouses Hot. Trade War Could Cool Them Down,” The Wall Street Journal, Sept. 17, 2019.
  15. Thomas, Patrick, “Amazon to Add 100,000 Electric Vehicles as Part of Climate Pledge,” The Wall Street Journal, Sept. 19, 2019.
  16. Smith, Jennifer, “E-Commerce Platform Shopify Buys Warehouse-Robot Startup,” The Wall Street Journal, Sept. 9, 2019.
  17. Diakantonis, Demitri, “Amazon and Walmart open more logistics centers, driving warehouse M&A,” Mergers and Acquisitions, Sept. 9, 2019.
  18. Peker, Emre; Zumbrun, Josh, “U.S. to Impose Tariffs on E.U. Goods After WTO’s Airbus Ruling,” The Wall Street Journal, Oct. 2, 2019.
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