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Woody Whitcomb

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Industry Trends

Canada Pacific Railway to Buy Kansas City Southern

Canada Pacific Railway announced a deal to take over Kansas City Southern for $27B as a rival company, Canadian National Railway, dropped pursuit. The deal would be one of the largest mergers in the U.S. railroad industry in two decades and create the first rail network between Canada, the U.S., and Mexico. The planned deal will create a railroad with roughly $8.7B in revenue and 20,000 employees based on 2020 estimates. Kansas City Southern is valued at $300 a share; shareholders of Kansas City Southern will receive 2.884 Canadian Pacific shares and $90 in cash for each Kansas City Southern share and will own 20% of the merged company’s outstanding shares.1

New Infrastructure Bill Influences Transportation Initiatives

The recent U.S. infrastructure bill includes provisions that could reshape how states allocate funds for transportation projects. One provision would offer $2 million in grants to help officials set up a more formal process to determine which projects receive funding. At the same time, another provides officials access to new data sources to help with fund allocation. As states typically use ambiguous “ranking criteria” to prioritize fund allocation, implementing these systems will help standardize this process nationwide, which should help save time and resources.2

U.S. Ports Expect Shipping Bottleneck to Extend into 2022

Record-setting shipping volume, coupled with manufacturers looking to replenish depleted inventory from the pandemic, has caused ports across the U.S. to experience a logjam. According to the National Retail Federation, major U.S. ports handled about 2.37 million imported containers this August, which is the most for any month since 2002. The Biden administration has since appointed a ports envoy to address how to improve U.S. cargo movement. Ports have emerged as one of the many bottlenecks in global supply chains as ships filled with containers carrying consumer goods are unable to unload at congested ports that cannot handle the increased shipping volume. This shipping surge is driven by Americans shifting their spending from intangible purchases, like vacations, to consumer goods, like office equipment and electronics. Experts expect the ships to continue to bottleneck at the delivery bays until “mid-2022”.3

Semiconductor Shortage Diminishes Truck Production

U.S. production of Class 8 trucks, the vehicles that haul most domestic freight, reached its lowest level since May 2020 - the peak of the pandemic and economic downturn. A total of 14,920 trucks were built in July, but the backlog of trucks ordered but not yet built has tripled from the same time last year to 262,100, according to ACT Research. Although American trucking companies are pushing for more capacity, ordering 90% more trucks than last August, the issue is sourcing the required equipment needed to build the trucks. The global semiconductor shortage and supply chain bottlenecks are limiting supply and hampering the elevated production objectives.4

Echo Global Logistics to Go Private

Echo Global Logistics announced that it plans to sell itself to private equity firm Jordan Co. L.P. in a $1.3B deal which would take one of the largest freight brokers in the U.S. private. The deal values Echo at $48.25 a share, roughly a 54% premium over its closing price of $31.32 on 9/9/21. Echo saw an 82% improvement in Q2 results when compared to the same period last year. This transaction looks to help solidify Echo’s market share, and the company will continue to be “aggressive with M&A” to increase scale. The deal is expected to close in Q4 2021.5

Walmart to Add 20,000 Supply Chain Workers This Year

Ahead of the upcoming holidays, Walmart looks to bolster its supply-chain operations as it competes with the likes of Amazon. This decision for earlier “peak season” preparation comes due to the shipping network congestion, a tight labor market, and increasing supply chain volatility. Walmart’s warehouse wages are up 14% from August of last year to a current average of $20.37 per hour for supply chain workers, and Walmart plans to continue raising wages to compete in the labor market. Due to the growing role of delivery and distribution in Walmart’s business model, these hires will be permanent, where last year’s hires were seasonal.6

Schneider National Looks to Carve Path Around Shipping Bottlenecks

Schneider National looks to charter smaller cargo ships to help alleviate some of the inbound shipping volumes for their clients. Schneider also plans to bring in at least 2,500 shipping containers by the end of the year. They plan to circumvent the shipping jams in Southern Californian ports by using the Port of Portland to alleviate some of the cargo jam.7

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • First Student, Inc./First Transit Inc.
  • EQT Partners AB
  • $4,555.00
  • Atlantic Aviation FBO Inc.
  • KKR & Co. Inc.
  • $4,475.00
  • AAA Cooper Transportation, Inc.
  • Knight-Swift Transportation Holdings Inc.
  • $1,350.00
  • Transtar LLC.
  • Fortress Transportation and Infrastructure Investors LLC
  • $640.00
  • Rail Leasing Business of The Andersons, Inc.
  • American Industrial Transport, Inc.
  • $571.18

Other Financial Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • The M.A.I.L. Group, Inc.
  • Architect Equity LLC
  • n/a
  • PORT 32 Marinas LLC
  • Makena Capital Management, LLC; Fireside Investments LLC; D1 Capital Partners L.P.
  • n/a
  • North America Central School Bus, LLC
  • H.I.G. Capital, LLC
  • n/a

Other Strategic Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Self-Driving Car Division of Lyft, Inc.
  • Woven Planet Holdings, Inc.
  • $550.00
  • Quality Carriers Inc.
  • CSX Corporation
  • $546.00
  • Expedited Logistics and Freight Services, LLC
  • Janel Group, Inc.
  • $47.00
  • IDEA Logistics LLC
  • EFL Global Logistics (Pte.) Ltd; EFL Global LLC (USA)
  • $9.70
  • Complete Transport Systems LLC
  • EFL Global Logistics (Pte.) Ltd
  • $6.10

 

Source S&P Capital IQ as of 10/11/2021 and PCE Proprietary Data

PCE Transactions

Contacts

Michael Rosendahl

New York Office

201-444-6280 Ext 1 |

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Michael Poole

Orlando Office

407-621-2112 |

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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. Lombardo, Cara, et al. “Canadian Pacific Reaches $27 Billion Deal to Buy Kansas City Southern.” The Wall Street Journal, Dow Jones & Company, 15 Sept. 2021.
  2. Harrison, David. “Infrastructure Bill Could Influence How States Select Transportation Projects.” The Wall Street Journal, Dow Jones & Company, 4 Sept. 2021.
  3. Berger, Paul. “U.S. Ports See Shipping Logjams Likely Extending Far into 2022.” The Wall Street Journal, Dow Jones & Company, 5 Sept. 2021.
  4. Smith, Jennifer. “Chip Shortage Curtails Heavy-Duty Truck Production.” The Wall Street Journal, Dow Jones & Company, 3 Sept. 2021.
  5. Smith, Jennifer. “Echo Global Logistics to Sell Itself to Private-Equity Firm in $1.3 Billion Deal.” The Wall Street Journal, Dow Jones & Company, 10 Sept. 2021.
  6. Smith, Jennifer. “Walmart Will Add 20,000 Workers to Supply-Chain Operations This Year.” The Wall Street Journal, Dow Jones & Company, 1 Sept. 2021.
  7. Smith, Jennifer. “Schneider National Looks to Charter a Path around Shipping Bottlenecks.” The Wall Street Journal, Dow Jones & Company, 26 Aug. 2021.
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