Big carriers continue to get bigger: Knight Transportation Inc. (No. 26 on the CCJ Top 250) has acquired Barr-Nunn Transportation Inc. (No. 187 on the CCJ Top 250), a 550-truck fleet based in Granger, Iowa. The enterprise value was $112.4 million, plus $3.5 million in incentives for hitting income targets and retaining key personnel over the next four quarters, Knight reported Wednesday.
Knight expects the current management team to remain in place and continue to operate the business under the Barr-Nunn name and with the Barr-Nunn “personnel, policies, and culture.” Barr-Nunn drivers, non-driving employees and customers “should notice little change,” according to the Knight statement.
Barr-Nunn was founded by Robert Sturgeon in 1982; Sturgeon’s wife Jane has served as CEO since his retirement.
”When Bob and I first discussed selling, we made it clear that the future of our people and the cultural fit would determine whether we would entertain any discussions,” Jane Sturgeon said, adding that Knight had been their leading choice and negotiations moved along quickly. “Importantly, Knight and we were up front and consistent about our points of view and, once we shook hands, neither of us wavered. We are confident that we found the right owner for the next generation of growth and success at Barr-Nunn.”
Barr-Nunn, which operates primarily in the Midwest and the eastern U.S., will benefit from access to the new parent company’s “capital, purchasing power and knowledge base,” added Kevin Knight, chairman and CEO of Knight Transportation.
”Bob and Jane Sturgeon, together with their experienced and talented team, have built a unique and highly profitable business centered around drivers, customers, safety and efficiency,” Knight said. “We do not intend to integrate Barr-Nunn into Knight Dry Van or to change the personnel, policies, compensation, or spirit that have contributed to a very successful business.”
And this operating independence “comes as a bit of surprise” to Stifel investment analyst John Larkin.
“One would think there would be synergies available if Knight were to combine the networks, integrate systems, and reduce administrative staff and additional overhead,” Larkin wrote in a note to clients Thursday. “But, the company chose to leave the companies separate as it was comfortable with the quality of management and believed the risk of driver turnover associated with incorporating Barr-Nunn into Knight Dry Van more than outweighed the potential benefits. In trucking now, drivers are king.”
That Knight was shopping for additional capacity, however, was “no surprise,” Larkin added, calling Knight “the most aggressive TL company” he covers, in terms of M&A. He also noted the company’s aborted bid for USA Truck a year ago and its $300 million credit line.
Larkin otherwise suggested the deal – which grows the fleet by 14 percent – was “very attractively valued” for Knight, coming in at 4.3x EBITDA for Barr-Nunn based its previous 12 months’ earnings of $26 million.