newsworthy
Pallet Racks
Platforms and
Pick Modules
• Design
• Manufacturing
• Engineering
• Turnkey Installation
CALL FOR A FREE ESTIMATE
Jeff Andrews, VP Sales
714-315-0009
JAndrews@Elitena.com
www.elitestoragesolutions.com
Mexico market. The trade lane is believed to hold much
potential but has yet to be fully exploited as far as intermodal services are concerned. About 60 percent of Pacer’s
revenue is generated within the contiguous 48 states, with
the remainder coming from U.S.-Mexico transborder services, Jacobs said.
All of Pacer’s top executives will remain with XPO following the acquisition, XPO said.
BUILDING A BROADER BASE
The last three XPO acquisitions—Pacer, last-mile delivery
company 3PD, and NLM, a provider of transportation
management services for the expedited shipping market—have been outside of XPO’s core brokerage segment.
Jacobs told DC VELOCITY last October that acquisitions in
the intermodal and freight management sectors would be
priorities in the months to come.
In a research note, John G. Larkin, lead transportation
analyst for investment firm Stifel, Nicolaus & Co., said the
company has “wisely ... de-emphasized growth in the less
defensible truck brokerage market, which in recent years
has become more commoditized.” This “crafty change in
strategic course,” as Larkin put it, should make it easier for
XPO to achieve its long-term objectives.
Jacobs said XPO is not concerned about profit regression
in brokerage, adding that the company is not moving away
from aggressively pursuing brokerage opportunities. “Of
the 100 or so acquisition candidates that are on our list,
most of them are in freight brokerage,” he said.
Jacobs has long asserted that the brokerage industry is a
deeply fragmented business that can be highly profitable
for an acquirer that can achieve both freight density and
economies of scale. “In terms of where the money is, it is
in brokerage,” he said.
PURCHASE PRICE QUESTIONED
As for XPO’s most recent acquisition, one intermodal
industry executive sharply critical of Pacer management
expressed astonishment that it would be acquired at a
“stratospheric” level of 11 times earnings before interest,
taxes, depreciation, and amortization (EBITDA). Well-run
nonasset-based companies shouldn’t be valued at anything
more than eight or nine times EBITDA, the executive said.
“People are picking their jaws off the floor on this one,”
the executive said.
The executive, who asked not to be identified, said Pacer
has been unable to compete for intermodal business with
either Hunt or Hub Group. The executive added that
XPO, in its quest for revenue to drive the growth demands
of analysts and investors, may have overreached with the
Pacer acquisition. “They are paying too much for too little,” the executive said.
XPO Logistics Inc. continued its acquisition march by purchasing intermodal marketing company Pacer International
Inc. in early January in a cash-stock deal valued at about
$335 million, or about $9 a share in cash and XPO stock.
The transaction vaults Greenwich, Conn.-based XPO
into the intermodal arena and insulates the company from
the vagaries of the freight brokerage business, the largest
segment of its revenue mix but one that has been increasingly vulnerable to profit-compressing commoditization.
XPO also operates in the freight forwarding and expedited
transportation segments.
Dublin, Ohio-based Pacer generated about $1 billion
in revenue in the 12-month period ending Nov. 30. The
acquisition effectively doubles XPO’s current revenue to
about $2 billion. Bradley S. Jacobs, XPO’s founder, chairman, and CEO, has said he expects the company to have
$5 billion in revenue by 2017 through a combination of
acquisitions and organic expansion.
Pacer is the nation’s third-largest intermodal marketing company behind J.B. Hunt Transportation Services
Inc. and the Hub Group Inc. According to XPO, Pacer is
the largest intermodal provider in the cross-border U.S.-
XPO buys Pacer International to gain foothold in intermodal space
