(This story has been updated to include commentary from a call hosted by Werner’s management team.)
Werner Enterprises announced Wednesday that it has acquired pure-play dedicated carrier FirstFleet for $245 million in cash and debt. The deal adds over $615 million in annual revenue and more than 2,400 tractors to Werner’s fleet, making Werner the fifth-largest dedicated provider in the U.S.
Werner’s (NASDAQ: WERN) existing dedicated fleet includes 4,865 units, which generated last 12 months’ revenue of $1.15 billion. Werner generates nearly $3 billion in consolidated annual revenue.
Murfreesboro, Tennessee-based FirstFleet also has a fleet of 11,000 trailers and 37 facilities, giving it a strong presence in the Eastern U.S. The carrier’s customer list mostly includes grocery, baked goods and packaging companies. It has served its top-10 customers for an average of 17 years.
“By uniting FirstFleet’s expertise in complementary new verticals with our resources and nearly 5,000 Dedicated trucks, we will improve our competitive position and accelerate profitable growth,” said Derek Leathers, Werner’s chairman and CEO. … “Together, we are better positioned to drive tech-enabled solutions and deliver lasting value for our customers, drivers and shareholders.”
The deal comes amid declining profitability at Werner. The company’s two main segments—TL and logistics—continue to hover near breakeven on the operating line. However, dedicated has been the outperformer for Werner during the prolonged freight recession.
As part of the deal, Werner will acquire FirstFleet and its owned real estate (12 properties valued at $37.8 million) for approximately $282.8 million.
Werner has identified $18 million in annual synergies, which will come from improved purchasing power, lower maintenance costs, and cross-sell and other revenue opportunities. It said FirstFleet has a slightly lower operating margin profile than its legacy dedicated business given FirstFleet’s higher trailer count requirements.
The acquisition is expected to be immediately accretive to earnings per share (by double digits) and free cash flow. However, the expected earnings accretion is at the trough of the cycle. Werner reported an adjusted net loss of 3 cents per share in the third quarter, with 4 cents in total adjusted EPS over the past year.
