The 2:00 Minute Warning

Continuing on the theme from last week’s Two Minute Warning, shippers should always be scanning the present day events and asking: Will these events have an impact on our transportation issues in the future?

I bring this up because last week there was an important announcement during TFI’s quarterly call with financial analysts covering the transportation markets. TFI disclosed that they own a 4% stake in ArcBest.

And after listening to the comments from TFI’s President and CEO, Alain Bédard, about how the two companies are interested in working together, you couldn’t help but wonder: Does this portend a further consolidation of carriers in the LTL sector? More specifically, is TFI interested in eventually acquiring ArcBest?

To address that question, we reached out to our network and talked with senior executives from several LTL carriers and here is what we’ve learned.

During a recent TranzAct Supply Chain Huddle, Geoff Muessig from Pitt Ohio shared why consolidation makes sense right now. Basically, if you’re a LTL carrier looking to expand your network, you need to have an infrastructure to support this growth. You can either invest in building this infrastructure or buy the infrastructure. Obviously the quickest and most efficient way to build your infrastructure is to buy a competitor. That allows the acquiring party to instantly expand their terminal structure, acquire more equipment, and gain a pool of drivers.

That is why Geoff noted that acquiring a customer base may not be the primary reason for making an acquisition. For example, after acquiring UPS Freight and rebranding as TForce Freight, TFI International found that about 30% of the volume was not a good fit with their network. Thus, an acquisition could result in a significant change in the customer base as well as the network footprint.

For a carrier that wants to sell, this may be an attractive market. The principal reason for this is that valuations have gotten better for those union carriers that were positively affected by the Biden administration’s decision last year to provide a $36 billion bailout to the Central States Pension Fund (CSPF). This was an anchor for a lot of union based carriers such as ArcBest and Yellow, and it immediately made them more valuable.

Another carrier CEO pointed out that TFI’s investment in ABF makes sense because TFI has a proven track record of being able to work with union based carriers. They proved that when they acquired UPS Freight and they’ve also proven that with their carrier lines in Canada. Frankly, I think this is a good sign. If you take a look at Yellow’s (YRC) experience, you will see that the union has acted responsibly in dealing with YRC’s executive team and Board of Directors in addressing the challenges that they have had. By the way, our friend Darren Hawkins, CEO of Yellow, made a statement that they have no intention of being any part of any merger or acquisition talks, as they have enough on their plate right now.

With that thought in mind, on the scenario planning front, shippers might want to ask the “What if” question. As in, if TFI bought or merged with ABF, how would that affect my company. That is why this potential consolidation in the LTL space is something to keep on your radar screen.

Before we sign off, make sure you have your calendar marked for an extremely important webinar that TranzAct will be hosting on March 9th at 11am Central with our friends from CSCMP’s Transportation Center of Excellence and the National Industrial Transportation League (NITL)

Join us for the webinar “What the Board Wants to Know About Your Supply Chain” to learn from other shippers with decades of experience.

What makes this such an important webinar? We will be addressing what you need to know when the Board (not the Parole Board, but the Board of Directors) calls and asks you to give a presentation on how your company is managing your supply chain and logistics challenges. We have some great resources lined up, so line this up on your calendar.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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