Copyright 2007, Traffic World, Inc.
Celadon Group is hedging its bets that shoring up capacity now will provide dividends later if the truckload market rebounds as expected in the second half of 2007.
The company''s most recent acquisition, Charles City, Va.-based Warrior Xpress for $8.3 million, comes only five months after its $21 million purchase of Nashville, Tenn.-based Digby Truck Lines. Celadon said the strategy behind both deals is to broaden its customer base, add density to its primary traffic lanes, and gain experienced drivers.
"We believe we can enhance the service to Warrior''s former customers through an upgraded equipment fleet, excellent technology, more available assets for dispatch, and an outstanding safety record," said Celadon''s Chairman and CEO Steve Russell.
Celadon, which generated $480 million in revenues in fiscal 2006, is doing deals during a time analysts predicted would be a mad scramble for market share as prices in the truck markets are at their lowest point in years and volumes remain slow.
According to the American Trucking Associations, total tonnage handled by trucking companies in January 2007 was 5 percent below January 2006 on a seasonally adjusted basis. It was the second weakest month for truck tonnage (behind November 2006) on a year-over-year basis since 2000.
Celadon "appears to have this acquisition strategy down to a science," said investment firm Stifel Nicolaus, "evidenced by the fact that the company felt comfortable purchasing Warrior only five months after its purchase of Digby Truck Lines - a company roughly 2.5 times the size of Warrior."
This compares with the 18 months the company waited following its acquisition of the truckload division of Champaign, Ill.-based CX Roberson for $23 million before agreeing to purchase Digby last October.
Although Warrior is relatively small, "we are encouraged to see (truckload carriers) looking to grow through acquisitions," said Wachovia''s Justin Yagerman. "Our sense is that a continuation of the freight softness could make marginally profitable carriers more inclined to exit the business."
Gaining a stable of drivers was an important aspect of the Warrior purchase, according to Russell.
"At Celadon, our driver turnover has been significantly better than the industry average over the past few years, and we plan to work hard to retain the Warrior drivers," he said. "In the short term, the additional Warrior drivers will retain their units until seated with newer equipment. We believe this strategy will allow us to focus on enhancing our freight mix, assist with driver retention and minimize the risk of unseated tractors following the acquisition."