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Hub Group sees big cross-selling opportunity following Choptank purchase

Hub customers to have access to over-the-road reefer transport, while Choptank customers to get managed transportation services

Hub chills out with Choptank buy (Photo: Shutterstock)

In 2000, Geoff Turner founded Choptank Transport Inc. to help farmers and food companies on Maryland’s Eastern Shore move time- and temperature-sensitive produce to market. Two decades later, those efforts culminated in Choptank being acquired by one of the nation’s largest transportation companies.

Hub Group Inc. said Tuesday it acquired Preston, Maryland-based Choptank, which specializes in truck brokerage for refrigerated goods, for $130 million in cash. The move gives Oak Brook, Illinois-based (NASDAQ: HUBG) Hub a foothold in the refrigerated  business, which generates about 70% of Choptank’s total over-the-road revenue. Choptank is on pace to generate $470 million in annual revenue, Hub executives said Tuesday in an analyst call. Choptank is a non-asset-based provider, meaning it owns no transportation assets and relies on motor and rail carriers to haul its customers’ freight. All of Choptank’s 400 employees, including Turner, will join Hub. 

The acquisition pushes Hub’s brokerage revenue above the $1 billion mark and, according to Hub executives, represents a big step toward reaching its goal of between $5.5 billion and $6.5 billion in revenue by 2025. Hub posted 2020 revenue of just under $3.5 billion, of which brokerage represented $431 million. Hub’s giant intermodal business accounted for more than half of its 2020 revenue. With the acquisition, non-asset-based business accounts for 40% of Hub’s total revenue.

In conjunction with the Choptank purchase, Hub said it will add 550 intermodal reefer containers, bringing its total to 1,000 boxes.

The transaction, which closed on Tuesday, creates strong cross-selling opportunities for Hub, company executives said in the analyst call after the deal was announced. Because Hub’s over-the-road business has focused on dry van and LTL, its customers never had access to over-the-road refrigerated services, executives said, adding that in return, Choptank’s roughly 1,500 customers will have managed transportation opportunities that have not been available.

Choptank’s traffic will also help Hub fill equipment heading westbound from inland points that might otherwise return empty, Hub executives said.

On the call, Hub COO Phil Yeager kept returning to the cross-selling synergies that will emerge from the deal. “We now have a model that works across the board,” he said, noting the addition of Choptank’s reefer services to Hub’s portfolio. 

Choptank historically grows its revenue by about 10% a year, but Hub executives expect top-line expansion in the mid-teens range as Choptank’s organic growth combines with the new revenue generated by cross-selling programs. 

The U.S. refrigerated trucking segment is fragmented with a lot of local players. The long-distance refrigerated trucking category will generate about $9 billion in revenue this year, according to a forecast from IBISWorld. Food and beverage is the dominant vertical in the refrigerated trucking category.

Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.