By Pat Shaver
NORTH LIBERTY—With a recent acquisition, Corridor-based Heartland Express became the fifth largest asset-based truckload fleet in the U.S.
Heartland Express announced Nov. 11 that it acquired Gordon Trucking Inc. (GTI) of Pacific, Wash.
“It’s just an all-around great acquisition from our perspective, to be able to acquire a quality carrier that’s in areas where we don’t operate. There’s a lot of things they do better than we do and a lot of things we do better than they do,” said Michael Gerdin, Heartland CEO.
Heartland acquired 100 percent of the stock of Gordon Trucking Inc. and certain associated assets in transactions valued at about $300 million. With combined total revenue of about $1 billion and a terminal network spanning from Washington to Florida and from Pennsylvania to Southern California, Heartland estimates the combined companies will operate the fifth largest asset-based truckload fleet in North America.
Steve and Scott Gordon have joined Heartland’s management team. Larry and Virginia Gordon will retire after 50 years of building GTI, and Larry Gordon has joined Heartland’s board of directors. The transactions are expected to be immediately accretive to Heartland’s earnings per share, excluding transaction-related expenses.
“We get a lot of opportunities to look at carriers. Every week there are carriers that are for sale. What we were seeing for quite a long time is that there are carriers available but they were small. We wanted something that was bigger,” Mr. Gerdin said. “We were very patient until we found the right opportunity.”
The two companies had been in talks for about a year, though Mr. Gerdin said they have known each other as friendly competitors for years.
This marks Heartland’s sixth acquisition since it became a public company in 1986.
“Safety is a huge thing for us. They hire drivers that are very safe the same way we do. The other thing is service to customers and they have a great reputation. The other benefit is geography. We have no overlap between the two companies even though we run similarly,” Mr. Gerdin said.
GTI was founded by the Gordon family in 1946, and the family remains actively involved in the business. The company is primarily focused on dry van markets but also gains about 14 percent of its revenue from refrigerated operations and 7 percent from freight brokerage operations. GTI’s equipment includes about 2,000 tractors and 6,500 trailers. GTI’s average length of haul is about 400 miles.
Heartland expects to use about $165 million of its cash reserves and expects to have about $95 million in outstanding debt after the transaction and repayment of assumed GTI debt.
GTI brings 2,100 drivers to the company.
“We have close to 5,000 trucks with the combined entity, and somewhere in the range of 5,500 to 6,000 employees. This is close to doubling us in size, not quite double but real close,” Mr. Gerdin said.
GTI’s service center network is in the western United States, with major locations in Washington, Oregon, Northern California, Southern California and Idaho. These locations have no overlap with Heartland’s locations and are expected to provide substantial geographic diversity to Heartland’s overall operations. Other locations include Arizona, Wisconsin, Illinois and Indiana.
The company’s major customers include: Georgia Pacific, General Mills, Pepsi, Wal-Mart and Unilever. Only one customer accounts for more than 10 percent of GTI’s total revenue, and on a combined basis, no customer is expected to account for more than 8.5 percent of combined Heartland/GTI total revenues. Of GTI’s 10 largest customers by revenue, only five are among Heartland’s top 10 accounts.
GTI has received numerous “carrier of the year” and similar service awards from its
customers. GTI has been the Washington Trucking Association’s safe carrier of the year for six straight years, is the 2012 Truckload Carriers’ Association safest carrier in the U.S. (100+ million miles category) and employs the reigning TCA truck driver of the year.
Both companies have received high Compliance, Safety, Accountability (CSA) scores as reported by the U.S. Department of Transportation.
“From the beginning, I told Mike that the owners were not eager to sell, but we would consider Heartland’s proposal because of our desire to be part of the best truckload carrier in the industry. Through these transactions, our people have the opportunity to build on a strong foundation, learn best practices, contribute to an industry leader and gain access to new customers and geographies,” stated Larry Gordon, founder and chairman of GTI, in a news release.
As a trucking company, Mr. Gerdin said they often are able to project the state of the economy.
“The freight lines have been pretty stable through the year. People think of trucking and the truckload industry as leading indicators of the economy. Everything we’re seeing is stable. It’s not robust and it is not terrible either,” he said. “It’s nice and steady. I don’t see that changing a whole lot into 2014. The economy is not as strong as we would like it, but at least it isn’t 2009.”
Heartland’s headquarters is located at 901 N. Kansas Ave., North Liberty. For more information, visit www.heartlandexpress.com.