ArcBest is keen on expanding TL brokerage presence with acquisition of MoLo

Fort Smith, Arkansas-based ArcBest, a full-service supply chain logistics provider, said late yesterday that it has entered into a definitive agreement to acquire Chicago-based truckload freight brokerage MoLo Solutions LLC.

ArcBest said that this transaction is comprised of a cash payment at closing of $235 million from available funds and subject to post-closing adjustments and is expected to close in the fourth quarter.

Upon completion of the acquisition, ArcBest said it will become a top 15 United States truckload broker and have access to more than 70,000 motor carrier partners.

Established in 2017, MoLo’s 2020 revenue came in at $274 million, which represents more than 100% annual growth, and 2021 revenue is pegged to come in at around $600 million.

“We are pleased to add MoLo’s significant capabilities and talent to our truckload brokerage offering, allowing us to better meet the critical needs of our customers, deliver comprehensive supply chain solutions and accelerate our company’s continued growth,” said Judy R. McReynolds, ArcBest chairman, president and CEO, in a statement. “Since its founding four years ago, MoLo has built a strong foundation and reputation for excellence based on trusted customer and carrier relationships, as well as a proven ability to offer unsurpassed service. Since we began discussing a possible transaction several months ago, it became clear what a great fit MoLo was with ArcBest. ArcBest’s timely investment further accelerates growth by increasing the scale of our asset-light business, and MoLo’s proven ability to cultivate significant shipment growth with large shippers will be highly complementary and synergistic. This acquisition capitalizes on our terrific business momentum and positions us to enhance value for all of our stakeholders, including our customers, employees, communities and ArcBest shareholders.”

• ArcBest highlighted various benefits of this acquisition, including:
• Acceleration of Asset-Light business growth by improving ArcBest’s ability to serve larger customers and expanding access to truckload capacity partners;
• Expansion of ArcBest’s revenue opportunities through increased cross-selling potential, better ability to secure new customers and a strong presence in the logistics innovation hub of Chicago;
• Enhancement of shareholder value, including revenue and earnings growth and improved prospects for superior financial returns, through leveraging economies of scale and operational efficiency synergies. Expected to deliver accretion of EPS before acquisition-related amortization in the first full year of operations; and
• Strengthening a shared culture of customer obsession that has driven growth and compelling performance for both companies

MoLo CEO Andrew Silver noted that this partnership with ArcBest further advances the opportunity MoLo has to achieve its vision as a company.

MoLo has been able to reach $600 million in annual revenues with only 500 shippers; in doing this deal, we can now tap into ArcBest’s 30,000 existing shippers and offer them the same level of service we’ve been providing our existing customers. In addition to that, we can now offer our customers a breadth of services we couldn’t before, including owned assets, increased drop trailer capabilities, LTL, expedited, outsourced transportation management, and more. I am incredibly thankful that ArcBest sees the same potential in our people that we do. Together, we are going to accomplish great things.”

An ArcBest spokesperson told LM that the company is fueled by the simple notion of finding a way to get the job done for its customers to meet their needs, each and every day.  

“This acquisition provides the opportunity to double our capacity available and enhance our ability to deliver comprehensive supply chain solutions to create outsized value for customers, employees and investors,” she said. “To be a holistic logistics provider, it’s essential to have a strong truckload offering. The acquisition of MoLo doubles the capacity available to our combined group of customers and provides additional shipper business to our capacity partners. By providing a seamless and significantly enhanced truckload brokerage offering, we will strengthen and grow our customer relationships.”

ArcBest and MoLo did not have a prior business relationship, the spokesperson said, but she noted that both companies have a shared passion for people, including employees, customers and capacity partners and have built their companies on trust and strong relationships.

“Since first discussing a possible transaction, it was clear that MoLo and ArcBest are a perfect strategic fit,” she said.

As for the main competitive advantages of this deal, from an ArcBest perspective, the spokesperson said that ArcBest is a logistics powerhouse today because it has a history of smart decisions.

“We have built and will continue to build innovative solutions our customers need for tomorrow,” she said. “The scale of the combined companies doubles the capacity available to our customers and provides current MoLo customers access to a suite of integrated logistics services with one provider.

Cowen analyst Jason Seidl wrote in a research note that his firm sees this transaction as an attractive entry point for ARCB to diversify its revenue mix with more asset-light exposure.

“[P]re-acquisition, ARCB’s asset-light/asset mix was 34%/66%, respectively, and post-acquisition ARCB will be 44%/56%, respectively,” he wrote. “Significant synergy opportunities may position ARCB to grow all business segments, and leverage MoLo’s digital initiatives to drive automation and efficiencies.”

And Ben Gordon, Managing Partner of Cambridge Capital, an investor in niche supply chain leaders, and also Managing Partner of BGSA Holdings, a leading mergers and acquisitions advisory firm focused on the transportation, logistics, and supply chain technology sectors, observed that this deal reinforces the ongoing thesis that incumbent transportation giants are increasingly pursuing technology and tech-enabled logistics companies.

“I predict we will see several more deals that fit this pattern before 2021 is out,” he said.