Con-way Inc. announced today, July 16, that it has entered into an agreement to acquire Contract Freighters Inc., a privately held North American truckload carrier based in Joplin, Mo., in a transaction valued at $750 million.
Founded in 1951, CFI is an industry-leading service provider that today operates more than 2,600 tractors and more than 7,000 trailers, with more than 3,000 employees, including about 2,500 drivers that serve customers throughout North America. In 2006, revenues were 427 million, 40 percent of which came from Mexico-related business. The company is debt free and has been solidly profitable.
The acquisition elevates Con-way into a unique position in the freight transportation industry, creating a leading less-than-truckload, TL and supply chain management enterprise with a broad portfolio of high-value solutions, says Douglas W. Stotlar, president and chief executive officer of San Mateo, Calif.-based Con-way.
“Acquiring CFI is a significant addition to Con-way’s ability to serve the customer,” Stotlar says. “It establishes a superior platform for growth, clearly differentiating Con-way as a premier provider of supply chain and freight transportation solutions. This acquisition is a cornerstone of our strategic plan to grow the company, build competitive advantage and increase shareholder value.”
The acquisition will join CFI with Con-way’s existing Con-way Truckload division with 470 drivers, creating a business unit with more than $500 million in annual revenues for TL freight, the companies say. The new business unit will account for about 20 percent of Con-way’s linehaul movements.
Together with the complementary capabilities of LTL carrier Con-way Freight, and global supply chain services provider Menlo Logistics, the Con-way organization will deliver an expanded transportation and logistics platform to North America-based shippers as well as global businesses, from “first-mile” sourcing in Asia or Europe, to “last-mile” delivery in North America, the organization says.
“We are excited to join the Con-way family of operating companies,” says Herb Schmidt, president and CEO of CFI. “CFI will benefit from Con-way’s infrastructure, broad service capabilities and strong brand recognition. Becoming part of the Con-way organization will allow us to penetrate new markets and provide new services to our customers. In addition, Con-way and CFI share service philosophies and common values such as safety, integrity, commitment and excellence.”
The acquisition will be structured as a merger, as a result of which Con-way will acquire CFI’s parent holding company, Transportation Resources Inc., CFI and all other subsidiaries of the parent holding company. The acquisition is subject to customary review by regulatory authorities and fulfillment of closing conditions. The boards of directors of both companies have approved the transaction, which is expected to conclude during the 2007 third quarter.
The companies expect to realize a number of strategic benefits from the combination, including:
Stotlar and Schmidt both cited the similar cultures and focus on service integrity, which are inherent to both organizations, as a key factor in joining the companies. “We’re very excited about this acquisition and the positive effect that joining these two industry leaders will have on the transportation and logistics market,” Stotlar says. “This is a unique and powerful fit of two successful companies that together have great prospects for growth, and for driving sustainable service advantage for our customers, opportunities for our employees and increasing value for our shareholders.”
Con-way intends to fund the acquisition with existing cash resources together with proceeds from debt financing. The company believes that the allocation of capital to this acquisition will be more accretive than alternative uses of funds. Lead financial adviser on the acquisition for Con-way Inc. was Morgan Keegan & Co., with additional advisory support and financing for the acquisition provided by Goldman, Sachs & Co.
Con-way also announced plans to close its Memphis-based truckload division following the acquisition. Con-way Truckload Services employs 40 administrative personnel and 550 truck drivers. The 14,000-square-foot office is expected to close within the next four months, says Con-way Truckload Services president Clay Halla.
