Forward Air has agreed to acquire Central States Trucking and Central States Logistics from Central States Inc. for $95.6 million.
The deal is expected to close by the end of the first quarter of 2014, subject to various customary conditions. The transaction will be funded by Forward Air’s cash reserves and is expected to be accretive to its 2014 earnings.
Central States, which operates primarily within the U.S. Midwest, provides container and intermodal drayage services, linehaul service within the airport-to-airport space and dedicated contract and container freight station warehouse services. The Bensenville, Ill.-based company had unaudited revenue of about $66 million in 2013, including 60 percent from intermodal and container drayage, 20 percent from linehaul, 10 percent from international warehousing and 10 percent from dedicated contract carriage, according to Stifel Transportation & Logistics Research Group.
“We are extremely pleased to join the Forward Air team,” said Bryan Grane, Central States’ president and CEO, in a written statement. “With the combined entity offering over 90 terminals and 40 CFS stations, we will be able to provide our international air and ocean customers with greater supply chain flexibility, scale and continuity.
“For a number of years we have had the desire to enter the drayage space via purchase of a company with a scalable platform,” said Bruce A. Campbell, chairman, president and CEO of Forward Air. “CST not only provides that platform, but does so while achieving the high margins and low asset intensity that our shareholders have come to expect from us.”
“Over time, we feel confident that Bryan and his team of seasoned transportation professionals will give us the ability to duplicate their approach to the drayage space on a nationwide scale,” Campbell added. “Undoubtedly, there will be both cross-selling and operational opportunities for our combined teams to take advantage of as we move forward.”
Stifel said the acquisition is a “good deal” for both Forward Air and Central States. Forward Air, which provides transportation and logistics services to the U.S. and Canadian air freight and LTL market, will help Central States accelerate its core growth rate, according to the report. Conversely, Stifel upgraded Forward Air’s earnings per share for 2014 and 2015 from $2.04 and $2.23 respectively to $2.20 and $2.50.
“This is the classic example of a good company who was hesitant to grow on its own, but with a larger, stronger partner like Forward Air, the management team will look to expand and grow with its improved financial backing and broader portfolio of service offerings for its customers,” the Stifel report explained.
Last year, Forward Air acquired Total Quality, a Michigan-based provider of security and temperature-controlled services to the pharmaceutical and life science industries, for $66 million.