Following a December 1 announcement stating that it reached an agreement to acquire Kansas City-based Freightquote.com for $365 million, global logistics services provider and freight forwarder C.H. Robinson Worldwide Inc. (CHRW) said today the acquisition has been made official.
CHRW said that it financed the acquisition and related fees and expenses with the proceeds from an amended five-year, $900 million credit facility.
Bringing Freighquote, a privately-held freight broker with projected gross revenues for 2014 of $623 million, with net revenues projected to be around $124 million, and EBITDA at about $34 million, helps CHRW to expand its freight brokerage presence even further.
Freightquote established in 1999 by Tim Barton and is one of the largest Web-based freight brokerages in the United States and has roughly 1,000 employees. It has approximately 80,000 customers for whom it provides less-than-truckload (which is its largest net revenue contributor), truckload, and intermodal services. Freightquote.com leverages a proprietary e-commerce technology that enables shippers to easily access competitive rates and automated load acceptance, and payment functionality, with CHRW noting that e-commerce is poised to play a bigger role of future supply chain services, CHRW added. With the deal closed, Barton will serve as a consultant to Freightquote.
Addressing his company’s overarching acquisition philosophy and approach on a December 1 conference call, John Wiehoff, CHRW chairman and CEO said that CHRW tries to find fewer deals with what it believes is a fairly clear filter around what can make a positive impact on the company.
“We don’t acquire businesses just for additional market share,” he said. “We like to focus on things we like to think will be helpful for both the company we are acquiring and to make Robinson stronger, and we believe we have found that here. We are very confident in the people, company [Freightquote.com] and the culture being a good fit. There is some business process and technology and e-commerce things that we are very excited about, and a focus on small business customers that we think will be a good thing as well. This is a good acquisition for CHRW, and it will make both companies better.”
With its roughly 80,000 customers, Wiehoff noted that Freightquote has a larger customer base than CHRW currently has, which, he said, is reflective of its penetration in the market place segments Freightquote has.
What’s more, he said Freightquote’s top ten customers represent less than ten percent of its total business, coupled with it having some larger customers it has been successful growing over time.
“This [deal] will increase our share with smaller businesses,” he explained. “Freightquote has developed a large customer base in this market with approximately 80,000 customers doing business using its e-commerce platform, which is largely transactional-driven. The small business community is important to CHRW and continuing to grow this segment is part of our strategy to increase our market share.”
With LTL making up about two-thirds of Freightquote’s net revenue, the company was a top five provider of LTL services, and the combined LTL business between CHRW and Freightquote will make CHRW an even stronger organization in that space, he said.
On the technology side, Satterlee said that Freighquote has done a great job of putting its customers where they need to be to secure capacity through the development of its effective e-commerce storefront with access to competitive market rates, automated load acceptance, and a high level of functionality. And he added that the combination of Freightquote’s technology and CHRW’s Navisphere platform, which provides end-to-end visibility, consistent business processes, and strategy-driven business intelligence on a global basis, has it well positioned for the future needs of its business.
Richard Armstrong, chairman of supply chain consultancy Armstrong & Associates Inc. said this deal is a reflection of CHRW’s continuing dominance of freight brokerage, with an expansion into adjacent freight brokerage areas.
“A few years back, it started its TMC group [which focuses on managed transportation services on a global basis through TMS or a transportation management system], which has been quite successful as a systems management operation,” he said. “Freightquote started as a dot-com and has a lot of LTL traffic, and its emphasis has always been on small shippers, the ones that have three or four shipments a day, and they have done that very well, efficiently, and profitably. It makes sense in that this is a part of the market that CHRW has traditionally captured, and this is a good way for them to move into this area and spread their influence and dominance in the market.”
Armstrong added that this deal makes sense for CHRW as did its acquisition of global freight forwarder Phoenix International in late 2012 to expand its global freight forwarding capabilities. And he explained that these types of acquisitions help to flesh out the offerings it has.