XPO Logistics acquires East Coast Air Charter Inc.

Staying true to a major theme of expanding its service offerings—growth through acquisition—non-asset based third party logistics (3PL) services provider XPO Logistics announced today it has acquired the operating assets of Statesville, North Carolina-based East Coast Air Charter Inc. (ECAC), a non-asset, 3PL focused on expedited air charter brokerage. 

ECAC had 2012 revenues of roughly $43 million, according to XPO, and the cash purchase price of ECAC was $9.25 million, with no assumption of debt, excluding working capital adjustments and is expected to be immediately accretive to earnings.

This follows previous acquisitions made by XPO in the last year, including:
-acquiring the operating assets of Turbo Logistics Inc., the freight division of OHL for $50 million last October;
-acquiring Continental Freight Services, a non-asset based 3PL focused on truck brokerage services and based in Columbia, S.C. in May;
-and acquiring Canada-based non-asset 3PL Kelron Logistics in August.

XPO said that former ECAC owner William McBane will continue to lead the company, which was established in 1997. And XPO officials said that this acquisition will expand XPO’s service platform for expedited transportation, freight brokerage, and freight forwarding.

In an interview with LM, XPO Logistics Chairman and CEO Brad Jacobs said that bringing ECAC into the fold first very well with XPO’s Express-1 division, which focuses on expedited transportation services.

“We were doing a lot of business with ECAC through our expedited group, and we said we should bring it in house and start cross-selling it across all of our 59 locations,” said Jacobs. “That is what the plan is. They are a long-term partner, and we have been doing business with them for most of the time they have been in business.”

The XPO top executive also cited ECAC’s proprietary technology, which he said was impressive and geared towards air charter shippers as it gives them visibility into air carriers’ selection process.

Going forward, Jacobs explained that XPO’s plan for ECAC is not to keep it as a $43 million business. Instead, he said the plan is to cross-sell air charter expedited services through all 59 XPO locations, which is happening effective today.

“We have customers in auto, defense, pharmaceutical, healthcare, and oil and gas, which are all big sectors that need and use domestic air charter services and now we will be able to go deeper into them,” said Jacobs.  

A look back: Over the last 14 months, Jacobs said XPO has been fully executing on the strategy it articulated when Jacobs, an entrepreneur and founder and owner of Jacobs Private Equity LLC, and a group of investors made a $150 million commitment into Express-1 Expedited Solutions, a non-asset-based third party logistics transportation provider, and subsequently re-named the company XPO Logistics, in mid-2011.

Key components of the strategy include:
-opening 17 cold starts (establishing new operations in new cities), with 8 in truck brokerage, 8 in freight forwarding, and 1 in expedited;
-completed 5 acquisitions, including the aforementioned $150 million commitment into Express-1;
-grown the company’s headcount from 208 to more than 900, with 202 of them based in XPO’s national operations center in Charlotte, N.C. since March 2012;
-rolling out leading edge mentoring and training programs;
-introduced a scalable IT platform with two major upgrades to it;
-established a national accounts program to market to Tier-1 customers; and
-raised $289 million in common stock and convertible debt. 

“We are on track with all the major parts of our plan: scaling up operations, acquiring new businesses, and rolling out cold starts,” he said. “We are now at a $500 million revenue run rate, which is almost three times the revenue, which is almost three times…revenue reported in 2011. Our liquidity is strong. As of February 1, we had approximately $250 million cash in the bank, and our goal is to acquire at least $250 million of revenue this year and to open several new cold starts as well. We are targeting cities where there is strong logistics talent to build large brokerage businesses.”

Even though things are heading in the right direction, Jacobs said that $500 million is 1 percent of $50 billion, explaining that XPO currently represents one-one hundredth of the market, and XPO “wants its fair share of the market” in the 10 percent range and wants to build itself into a multi-billion organization.

“We have targeted 3 million small- and medium-sized businesses through various sources, and we are calling them all every day,” he said. “And we now have people throughout the company that have been dealing with big Tier-1 names for 20 years or more and are also targeting the 1,000 largest shippers in the U.S. and want to go deep there as well.”