Transportation deals: Forward Air set to acquire Black Hawk Freight Services Inc.

Jeff Berman, Senior Editor -- Logistics Management, 11/27/2007

GREENEVILLE, Tenn.—Forward Air Corporation announced yesterday that its wholly-owned subsidiary Forward Air Inc., a high-level air cargo service contractor and provider of time-definite ground transportation services, has entered into an agreement to acquire certain assets of Black Hawk Freight Services Inc., a Milan, Ill.-based provider of transportation services, including expedited line haul, exclusive use vehicles (EUV), local cartage, pool distribution services, and customs services, and hot shots.

Black Hawk generated roughly $30 million in revenue for the year ending December 31, 2006, according to a Forward Air Corporation statement. Forward added that this transaction is expected to be completed around December 3. Financial terms of the transaction were not disclosed.

Forward Air Corporation Senior Vice President and Chief Financial Officer Rodney L. Bell told Logistics Management that this acquisition is beneficial for Forward and its customers on various fronts.

“Two-thirds of this acquisition is what we characterize as a ‘tuck-in,’ with the airport-to-airport and line haul business that is a part of our core business,” said Bell. “What makes Black Hawk particularly attractive is that is a very clean operation and very serviceable, as opposed to other competitors we have purchased in the past. And their pricing [model] was very comparable with ours.”

Bell added that Forward is continually on the look out for these types of acquisitions.

Competitive differentiators: In terms of how this deal will help Forward maintain a competitive advantage in the air cargo marketplace, Bell said it will now have access to four key Iowa markets it did not have access to before—Des Moines, Burlington, Cedar Rapids, and Moline (in the Quad City area).

Another benefit will be the continued segue way into the pool distribution business, which helps build a geographic footprint in that market as well. In late July, Forward acquired USA Carriers, a pool distribution services provider, which at the time of the acquisition had back-office operations in Fort Wayne, Ind. 

A good fit: Forward Air Corporation Chairman, President and, CEO Bruce A. Campbell said in a statement that Forward’s and Black Hawk’s respective operations are a good fit on many levels. As an example of pool distribution services, Bell said a retailer may have 30 less-than-truckload (LTL) shipments that are destined for stores in the Miami metropolitan area, and the retailer has two options to move the freight. One way would be to move the freight via LTL, which can be very costly. Or, he said, they can consolidate or "pool" the freight and send it as far down the supply chain as they can as a consolidated truckload and then break the freight apart at a terminal location in the Miami area at which point it would be further distributed to their stores.   

He cited how Black Hawk’s cartage operation will support Forward’s Forward Air Complete initiative, an integrated freight forwarding and logistics service offering introduced in September 2006. This service, according to Forward, bands Forward Air’s expedited ground transportation network with local pick-up and delivery services in the largest cities throughout the United States, and it allows freight forwarders to electronically select the exact cartage services they need in cities around the country and bundle those services with time-definite airport-to-airport linehaul.  

Campbell added that Black Hawk’s pool distribution operations will add to the geographical footprint of Forward’s pool distribution provider, Forward Air Solutions. And another area that will augment Forward’s operations, according to Campbell, is how Black Hawk’s exclusive use vehicles, hotshot, customs services and airport to airport services compliment Forward’s existing airport to airport network.

“We believe this acquisition will allow us to provide more service options for our existing customers,” said Campbell.

Stifel Nicolaus analyst John Larkin said in a research note that this acquisition continues the strategy of Forward’s management team of using—what he views—as its strong balance sheet to grow into other business segments (aside for the core airport-to-airport operation) via acquisition.

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