Blog Coverage: Hub Group Acquires Contract Carrier Estenson Logistics

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LONDON, UK / ACCESSWIRE / May 30, 2017 / Active Wall St. blog coverage looks at the headline from freight transportation major Hub Group, Inc. (NASDAQ: HUBG) as the Oak Brook, Illinois based Company announced on May 25, 2017, that its subsidiary, Hub Group Trucking, Inc., has acquired Mesa, Arizona based Estenson Logistics, LLC. The transaction is valued approximately $306 million. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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Commenting on Estenson’s acquisition, David Yeager, Chairman and CEO of Hub Group said:

“We have been searching for an acquisition in the dedicated space for some time and have found an organization with a great fit in terms of culture, management style, and business philosophy. Estenson has a long history of outstanding customer service and is focused on safety and providing its employees with a solid foundation for growth.”

Tim Estenson, CEO of Estenson added:

“We built our Company from the ground up and we are passionate about a superior customer experience and employee satisfaction. It was extremely important to me personally to find a home for us that shares those values. This is why we are extremely excited to be a part of the Hub Group family and I am looking forward to staying on board to see our Company continue to flourish.”

About Estenson Logistics

Estenson Logistics was founded by Tim Estenson and Paul Truman in 1999. It is one of the premier dedicated logistics Company, and Transport Topics ranks it as the 14th largest dedicated contract carrier in North America. For FY16, it was named the Dedicated Van Partner for The Home Depot. The Company has 1,200+ power units and 5,000+ trailers and covers more than 120 customer locations. The Company’s revenue for FY16 was approximately $250 million.

The transaction

Founded in 1971, the Hub Group is one of the largest transportation management Company that offers multi-modal solutions throughout North America, including intermodal, truck brokerage, and logistics services with approximately $3.6 billion in annual revenues.

As per the signed agreement, Hub Group Trucking will take over the whole business of Estenson. The offer price of approximately $306 million includes approximately $17 million that Estenson had spent to acquire equipment recently. The enterprise value of the transaction is approximately $289 million which is 6.75 times of adjusted EBITDA for FY16. The agreement also has a provision for Estenson to receive an additional $6 million if certain EBITDA targets are met for the two years after the closing of the transaction.

Hub Group plans to finance the transaction using a mix of cash in hand and refinancing of Estenson’s secured equipment notes and borrowings post the closing of the transaction.

The transaction is expected to close on or around July 01, 2017, and is subject to regulatory approvals and closing conditions.

Once the transaction is completed, Estenson’s business will become part of Hub Group Trucking and will be rechristened as Hub Group Dedicated Services. The current CEO of Estenson, Tim Estenson and his top management team will continue to manage the business in their current roles. Mesa, Arizona will continue to be the headquarters for Hub Group Dedicated Services.

How Hub Group Trucking benefits from the acquisition?

With the acquisition of Estenson’s dedicated services, the Hub Group’s clients would have access to complete multi-modal solutions including intermodal, truck brokerage, logistics, and dedicated trucking. Hub Group plans to accelerate the growth of the new division via various cross-selling opportunities, which are expected to be over $100 million within the next five years.

With the acquisition of Estenson’s 1,200 power units, Hub Group’s trucking operation will expand to over 3,800 power units. This will help Hub Group Trucking in the efficient deployment of equipment and drivers.

The transaction is expected to be accretive to Hub Group’s earnings in FY17.

Stock Performance

Hub Group’s stock is trading up by 1.61%, closing last Friday’s session at $34.65. A total volume of 441.04 thousand shares were traded at the end of the day, which was higher than the 3-month average volume of 320.82 thousand shares. The Company’s shares are trading at a PE ratio of 17.28 and have a market cap of $1.16 billion.

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