Roadrunner Transportation will be able to take a significant step in improving its balance sheet following its agreement to sell its Prime Distribution Services business to C.H. Robinson Worldwide (NASDAQ: CHRW).
The sale of Prime Distribution, which is part of Roadrunner’s Ascent division, will be for $225 million in cash. At the end of the third quarter, according to Roadrunner’s (NYSE: RRTS) 10-Q report filed with the SEC, the company had just $5.8 million in cash, down from $11.2 million at the end of 2018’s third quarter.
Prime, according to the statement on the sale issued by Roadrunner, “offers a comprehensive suite of retail consolidation solutions, with five food grade warehouse facilities strategically located across the nation and a team of retail supply chain experts dedicated to helping clients achieve compliance with large U.S. retailer delivery and in-stock requirements.”
Its sales for the full year in 2019 were $108.7 million. The Ascent division had revenue of $387.7 million for the nine months ended Sept. 30 and an operating loss of $29.1 million in the third quarter.
However, although the sale will bring in more than $200 million in cash, debt reduction rather than building a larger cash stockpile is planned for the proceeds.
“The divestiture of Prime Distribution Services is a unique opportunity for us to significantly improve our balance sheet by paying off all borrowings under our ABL and Term Loan Credit Facilities,” CEO Curt Stoelting said in the statement announcing the sale.
The asset-based lending facilities and the term loan credit facilities, totaling roughly $260 million, were taken on by Roadrunner last February in a restructuring of the company. Through that restructuring, Elliott Management now holds the vast majority of the common shares. Those facilities have been modified since February.
That restructuring lifted burdensome preferred share payments that Roadrunner was making to Elliott. The earlier Elliott purchase of those preferred shares is generally credited with giving Roadrunner a chance to reorganize.
Roadrunner has been struggling since an accounting scandal in June 2018. It posted an operating loss of $97.75 million in the third quarter and a nine-month operating loss of $266.7 million.
When the company restructured itself early last year, the one independent analyst who followed them, Bruce Chan of Stifel, actually predicted a sale like this as a result.
The sale is expected to close by the end of the first quarter, Roadrunner said.The C.H. Robinson release on the sale said Prime has approximately 270 employees and about 140 customers. It is based in Plainfield, Indiana.
Supply Chain AI Symposium
Past the hype. Join operators, founders, and enterprise leaders figuring out how to deploy AI in supply chain.
F3: Future of Freight Festival
Industry-defining keynotes, rapid-fire technology demos, and industry leaders networking in experiences across Chattanooga - plus the inaugural F3 Awards Dinner featuring the FreightTech and Shipper of Choice reveals.
Past the hype. Join operators, founders, and enterprise leaders figuring out how to deploy AI in supply chain.
The Old Post • Chicago, IL Register NowIndustry-defining keynotes, rapid-fire technology demos, and industry leaders networking in experiences across Chattanooga - plus the inaugural F3 Awards Dinner featuring the FreightTech and Shipper of Choice reveals.
The Signal at Chattanooga Choo Choo • Chattanooga, TN Register Now