Logistics/M&A news: YRCW agrees to sell YRC Logistics to Austin Ventures

Earlier this month, when less-than-truckload transportation services provider YRC Worldwide said it expected to achieve a positive adjusted EBITDA for the second quarter. It also mentioned that among the many steps it would take to address its short-term liquidity needs would be to consider the sale of additional equity or pursue other capital market transactions.

It did not take YRCW long to follow-up on that deliverable, as the company recently announced it has entered into a definite agreement to sell a portion of its YRC Logistics business to strategic private equity investor Austin Ventures.

YRCW and Austin said the sale price is $37 million, with “incremental value to be realized by both parties through a comprehensive commercial services agreement. And the transaction is expected to be completed in the next 30-to-45 business days.

YRCW officials said this deal will form the basis for a new company specializing in international freight forwarding, customs brokerage, transportation management, truckload services, and dedicated warehouse and fulfillment services in North America, Latin America, Europe, and Asia.

This is not the first time in recent months YRCW has offloaded a piece of its logistics business. In November 2009, it sold the contracts, personnel, and equipment of the Dedicated Contract Carriage division of YRC Logistics for roughly $34 million. At the time of the deal, YRC Logistics President John Carr said this deal is a strategic move towards a more asset-light business model and aligns resources at YRC Logistics to focus on its core offerings, including transportation, distribution, and global services.

YRCW Chairman, President, and CEO Bill Zollars said in a statement that the recent deal with Austin Ventures also allows the company to focus on core offerings and at the same time continue to offer full global logistics solutions for shippers through a strong business relationship with the new company.

YRC Logistics President Carr officials said that the YRC Logistics management team will remain intact, adding that the financial wherewithal of Austin Ventures positions YRC to pursue new business development as well as growth through acquisition.

YRCW said it will retain all of its China-based operations and said that the strategic partnership with Austin Ventures will give customers of the new Austin-owned logistics company ongoing access to these capabilities. 

“There will be no change in the way a customer’s business is handled, and they will benefit from advancements in the delivery of comprehensive supply chain solutions by both companies,” said Zollars. “In addition, the incremental liquidity from the transaction will support YRC Worldwide business growth.”

Future business growth is crucial for YRCW, given how the company has incurred losses of more than $2 billion over the past 11 quarters. But things appear to be trending up somewhat, with this month’s announcement regarding positive EBITDA in the second quarter and a gradual recovery in volumes in the LTL sector.

“YRCW needs to grow at a faster rate than other LTL carriers just because the company has lost a lot of business in the last several months and needs to regain that,” said Satish Jindel, president of SJ Consulting, in a recent interview. “And because they are still in difficult financial condition—but not as bad as 2009—they need to strengthen their operating business and the outlook for the second half of 2010 in our view may or may not be as good as the first half.”

Reasons for this cited by Jindel include how some sectors that contributed to first half tonnage growth may not be as active in the second half, as well as consumers tightening spending again, which could mean that the economic recovery may ultimately lack momentum throughout the rest of the year.