Earlier today, Phoenix-based national truckload carrier Knight-Swift Transportation announced it has thrown its hat into the less-than-truckload (LTL) arena, acquiring Dothan, Alabama-based LTL carrier AAA Cooper Transportation and its affiliated entity AAA Cooper for $1.35 billion.
Established in 1950, AAA Cooper’s operations are comprised of LTL, dedicated, and other services. It has roughly 70 service centers, with a terminal door count of more than 3,400. As for assets, the company has almost 3,000 tractors and 7,000 trailers. And on the personnel front, it has roughly 4,800 non-unionized employees.
AAA Cooper’s full-year 2021 forecast is pegged at revenue of $740 million, EBITDA at $140 million, and $80 million in operating income.
“We have long had interest in the LTL space and admired the success of AAA Cooper,” said Knight-Swift CEO Dave Jackson in a statement. “We feel honored to be stewards of the AAA Cooper brand and, similar to previous acquisitions, AAA Cooper will continue to operate independently, while benefitting from the many synergies we expect through Knight-Swift. Reid Dove has been appointed to the Knight-Swift board of directors and will continue to be the CEO of AAA Cooper. In seeking our first LTL partner, we had three main requirements—the scale for entry with significant market share, the profitability and management depth to operate independently and provide a platform for compelling growth opportunities, and a world class culture. We were excited to have identified AAA Cooper as a partner that meets all three requirements, and I couldn’t be happier to finally find the right time for both of us to create a partnership. This transaction firmly positions us as a meaningful player in the LTL space, where we intend to grow both organically and through future acquisitions.”
And Reid Dove, CEO of AAA Cooper, said in the same statement that joining the Knight-Swift team is an exciting combination for the AAA Cooper team members and customers.
“It will allow us to pursue new opportunities and accelerate our growth,” he said. “We will continue to operate as an independent company, headquartered in Dothan, Alabama, and will do so with the support and partnership of the strongest provider in the full truckload space. This is the fusion of two excellent companies in their respective sectors of the transportation industry, which makes this a win for our people, our customers, and for the newly expanded Knight-Swift team.”
On a conference call earlier today, Knight-Swift officials said that AAA Cooper has a proven LTL model, coupled with meaningful market share and profitability, adding that Knight-Swift offers up a strong growth-enabling platform in multiple ways, including
The company added that LTL will be the second-largest segment for Knight-Swift, while also noting that non-truckload trucking revenue as a percent of total expected revenue has increased from 22% to 27%
What’s more, it also observed that AAA Cooper “offers the scale to be a platform, the runway to improve profitability, and unmatched culture and leadership fit,” with the “LTL sector well-positioned for supply trends toward forward-positioned inventory, and e-commerce.
From a Knight-Swift perspective, it said that it will now have leading positions across truckload, dedicated, intermodal, brokerage, 3rd party carrier services, and also LTL, with this acquisition, which it said will continue to lower cycle volatility, add growth, and deploy capital towards strong returns.
“Knight-Swift Transportation Holdings is a powerhouse in truckload,” said 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 sector. “For years, many have wondered if they would make a move into less-than-truckload. AAA Cooper gives Knight-Swift a powerful base in LTL. At $1.35 billion, it is a major deal. It gives KNX the ability to deploy their operational strength in a new market segment with higher barriers to entry. They paid 9x 2021 EBITDA, which looks like an attractive valuation multiple in comparison with other public comparables. And it enables KNX to cross-sell its TL customers with LTL services, and vice versa.
Gordon also noted that this deal could also be a catalyst for increased consolidation, as well as convergence across multiple services in transportation. And it could also be a sign that truckload carriers will look for additional moves to add value-added services and differentiated capabilities, whether in LTL, last-mile, or logistics, he added.
Robert W. Baird & Co. analyst Garrett Holland wrote in a research note that through this opportunistic deal, KNX enters the LTL market, leverages its leading scale, and creates an even more formidable transportation/logistics provider.
“The addition of the LTL offering should help reduce KNX’s cyclicality overall, and management should be able to apply operational expertise to improve profitability/growth,” he wrote.