C.H. Robinson Worldwide sent a clear message about its global ambitions with the $635 million purchase of freight forwarder Phoenix International. The acquisition nearly doubles the size of C.H. Robinson’s overseas forwarding business in terms of volume, according to transportation analysts, greatly increasing the $10.3 billion company’s international reach, in ocean container shipping, air freight and customs. In particular, the deal gives C.H. Robinson a bigger presence in Asia-to-U.S. trade lanes where Phoenix moves nearly 200,000 20-foot-equivalent units a year. The company has 38 offices in Asia, 25 in the U.S. and 12 in Europe.
The deal should also help C.H. Robinson expand bundled and specialty services, such as those offered to chemical shippers by its ChemSolutions division, launched Oct. 1. The division provides multimodal bulk transportation, ocean and air freight forwarding, customs brokerage and global trade management services.
After the acquisition is completed, C.H. Robinson will handle more than 510,000 TEUs a year, according to research firm Stifel Nicolaus. Phoenix is Robinson’s biggest purchase since buying truck brokerage American Backhaulers for $136 million in 1999, and is one of the largest freight transportation deals this year.
The transaction is the latest in a string of acquisitions in the logistics and transportation market, as companies pursue growth by buying competitors in an economy that came close to stalling in the third quarter. Those acquisitions range from small, fit-in transactions, such as the truckload purchases of Roadrunner Transportation and Celadon Trucking in recent months, to the ongoing $6.6 billion UPS offer for Dutch express parcel rival TNT Express.
When it comes to mergers, transportation appears to be bucking the overall market, which saw M&A activity decline in the third quarter, according to Dow Jones VentureSource. Acquisitions of venture-backed companies decreased by 46 deals to 99 in the third quarter, a 32 percent drop from a year ago. Those deals raised $13 billion, 12 percent less than a year ago.
“The slip in M&A activity shows that corporate acquirers are still proceeding cautiously amid a slow economic recovery,” Zoran Basich, editor of Dow Jones VentureWire, said in a statement. Transport operators may be acting a bit more boldly, because, for one, they have cash, and two, more and more smaller companies are looking to sell. Transport operators also see acquisitions, rather than internal expansion, as the fastest road to growth. And companies such as Arkansas Best, which acquired Panther Expedited earlier this year, and C.H. Robinson say they are diversifying to meet future shipper demands. “Traditional solutions are no longer sufficient” to meet shipper needs, Arkansas Best President and CEO Judy R. McReynolds said in June after the $180 million acquisition of Panther.
The Phoenix acquisition shows C.H. Robinson looking beyond a market segment it already dominates — domestic truck brokerage in the U.S. — for opportunities overseas. “We see significant long-term opportunity in international forwarding as global trade expands, scale and technology continue to become more important, and shippers increasingly look to transportation providers to provide global services,” Chairman and CEO John Wiehoff said.
He added details on the company’s global strategy during a Sept. 25 analyst conference call. “It was right around 20 years ago that C.H. Robinson began offering global forwarding services,” he said. “While we’re proud of what we’ve accomplished in the last 20 years, joining with Phoenix clearly puts us in a new category in terms of our scale and capability.”
Chicago-based Phoenix, which had $807 million in revenue in its fiscal year that ended June 30, has operations in 15 countries and 50,000 customers. Approximately 60 percent of its revenue comes from ocean container forwarding, 20 percent from air freight and 20 percent from customs brokerage services, C.H. Robinson said.
“It’s a great business that anybody would like to own,” Wiehoff told analysts.
In comparison, C.H. Robinson reported about $116 million in net revenue from ocean, air and logistics services, including customs, in 2011. Truck revenue accounted for 75 percent of the Minneapolis-based company’s $1.6 billion net revenue in 2011 and 74 percent of net revenue in the second quarter.
The purchase of Phoenix isn’t a shift of focus away from C.H. Robinson’s U.S. truckload and less-than-truckload brokerage business, Wiehoff said. “We’re completely committed to being a leader in all the transportation modes,” he said. “We will always look aggressively for acquisitions in any of the transportation offerings we have.” As the largest player in truck brokerage, however, “there aren’t a lot of meaningful acquisitions we could invest in on the truck brokerage side,” Wiehoff said. The acquisition may be better viewed as an attempt to win more international business from those bread-and-butter trucking customers.
“There’s been a lot of activity in the industry around acquisitions and people trying to roll up businesses,” Wiehoff said. “We don’t do a lot of acquisitions. We try to be a little bit more thoughtful and take a longer-term approach. It’s not just a market roll-up strategy.”
Contact William B. Cassidy at firstname.lastname@example.org.