Heartland Express snatches up trucking company in $113m deal

Trucking and logistics company Heartland Express acquired 100 percent of the outstanding stock of Interstate Distributor Co.    North Liberty, Iowa-based trucking and logistics company Heartland Express, Inc. has acquired 100 percent of the outstanding stock of Interstate Distributer Co. (IDC) from Saltchuk Resources, Inc.
   IDC is based out of Tacoma, Wash., and mainly operates in the western and southeastern United States, primarily offering dry van and truckload transportation services, including local, regional, dedicated and transcontinental services.
   The enterprise value of the transaction was around $113 million, Heartland said. The deal was funded through $94 million of Heartland’s existing cash, plus the assumption of approximately $23 million of IDC’s debt, and the acquisition of $4 million in cash on IDC’s balance sheet.
   Heartland said it expects to pay off all of IDC’s debt after closing, and expects to integrate IDC into its existing operations, operating under the Heartland brand soon after closing.
   “IDC is an excellent operational fit, as its terminal network has nearly direct overlap with our current locations,” Heartland Chairman, President and CEO Michael Gerdin said.
   Over the next 18 months, the overlapping Heartland and IDC locations will largely be consolidated, Heartland said. In addition, numerous IDC drop yards will no longer be needed, since Heartland has a footprint of 21 terminal locations across the nation.
   IDC’s fleet consists of approximately 1,350 company tractors, 220 tractors supplied by independent contractors, and 4,700 trailers. Its average tractor age is three years, and its average trailer age is 7.5 years. Heartland said it expects to invest in refreshing IDC’s tractor and trailer fleet, bringing the average age closer to Heartland’s normal fleet range.
   The transaction is expected to be accretive to Heartland’s earnings in the first full quarter of operations.
   In the fourth quarter of 2013, Heartland also had acquired Pacific, Wash.-based Gordon Trucking in a deal worth around $300 million.
   Gerdin said that since the acquisition, “we have invested significantly in a new tractor and trailer fleet, returned our operating ratio to the low- to mid-80s, repaid all of the acquisition debt, and accumulated approximately $170 million in cash.”
   In regards to the Gordon Trucking purchase, industry analyst Stifel said, “That acquisition originally held great promise, but with the softening of truckload fundamentals related to demand and pricing, the deal did not create as much incremental value as anticipated. But, the Gordon deal may have laid the foundation for the Interstate deal to be all the more accretive. With overlapping lanes, service center networks, and drop lots, Heartland is anticipating a lot of room for the elimination of duplicate overhead and facilities as well as efficiencies associated with increased lane density and lane balance.”
   Stifel said the purchase price of IDC “looks attractive” and there is little customer overlap. “Integration should be swift and should enable accretion, from the deal, to be evident as soon as the 4Q17,” Stifel said.