Interstate Distribution – sold again after 6 years for $113 Million

In July 2017 Heartland Express (NASDAQ: HTLD), a transportation and logistics company, made another acquisition with the purchase of 100% stock of Interstate Distribution Co. (IDC) from SaltChuk Resources, Inc. in an all cash deal worth $113 million. The deal will include cash payment of $94 million and assumption of IDC’s $23 million debt and $4 million cash on balance sheet. The transaction is expected to provide future cash tax benefits with step up in basis of IDC’s physical assets (over its useful life) and from any goodwill/intangibles deductible over 15 years. Heartland plans to repay the assumed IDC debt after closing and continue to remain debt-free, with substantial liquidity from remaining cash of over $50 million and $170 million of available line of credit.

With about $325 million in revenues and operating loss in 2016, Interstate Distribution was acquired for a 0.30x revenue multiple. Prior to this, IDC was sold by McLean Family in 2011 to Saltchuk Resources for about $100 million or 0.23x revenue multiple.

Founded in 1933, Tacoma, WA based Interstate Distribution Co. providing primarily dry van truckload transportation services mostly in western and southeastern United States. With over 1,350 tractors and 4,700 trailers, IDC was recognized as one of the top three safest fleets in America by the Truckload Carriers Association. IDC’s blue chip customers include Lowes, Home Depot, General Mills, Starbucks, Ikea, and Clorox among others, with none representing more than 5% of total 2016 revenues.

Heartland and IDC seem to be a good strategic and operational fit, given the 1) consolidation of overlapping locations at Seattle-Tacoma, Oregon, Southern California, Phoenix, and Nashville; 2) consolidation of back office functions, 3) better yield through density, capacity allocation, and fewer empty miles, particularly in West Coast markets, and 4) downsize or improve certain non-core operations amounting to about 25% of business. The acquisition will expand Heartland’s revenue base by approximately 50% In exchange for approximately 6.5% of market capitalization and is expected to have EPS accretion in first full quarter of operations.

Prior to IDC, Heartland acquired Gordon Trucking, Inc. in November 2013 for about $320 million or 0.73x revenue multiple and 5.73x EBITDA multiple in form of cash, stock, earn-out and assumed Gordon debt.

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Sources:

https://www.joc.com/trucking-logistics/truckload-freight/heartland-express/heartland-express-buys-idc-builds-truckload-density_20170706.html

http://www.heartlandexpress.com/investors

https://www.freightwaves.com/news/heartland-express-acquires-interstate-distributors