Leading third-party logistics company C.H. Robinson Worldwide Inc. (CHRW) recently completed the acquisition of Freightquote.com, Inc. for $365 million in cash. The deal, which also includes fees and expenses related to the acquisition, was financed through the company’s five-year revolving credit facility of $900 million.
The deal was struck in Dec 2014 and was subjected to regulatory approvals. Scheduled to be completed by the end of first-quarter 2015, the company has finally wrapped up the takeover following the receipt of the necessary go-aheads.
Based in Kansas City, Freightquote.com was founded in 1998 by Tim Barton. The company is engaged in intermodal freight businesses and operates in North America. Notably, the company targets to achieve annual revenues of $623 million in 2014.
Growing popularity of online shopping will consistently put considerable pressure on the company’s supply chain management. Thus, we believe that the purchase of Internet-based freight broker Freightquote.com is a strategic fit for C.H. Robinson as it will boost the company’s supply chain network.
Over the last three years, C.H. Robinson bought two logistics service providers, namely, Phoenix International and Poland-based freight forwarder – Apreo Logistics S.A. C.H. Robinson also entered into a $500 million revolving unsecured credit facility in order to partly finance the acquisition of Phoenix.
On the third-quarter 2014 front, C.H. Robinson exited the quarter with only $128 million of cash and $500 million of long-term debt. Hence, we believe that the company’s intent to continuously expand its network through inorganic means will not only put its cash position under pressure but will also increase leverage, moving ahead.
Further, the company expects to incur annual amortization expenses of approximately $16.3 million over the next eight years related to the acquisition of intangible assets from Phoenix. Consequently, amortization expenses coupled with rising interest burden will undermine profitability for C.H. Robinson going forward.
Stocks to Consider
C.H. Robinson carries a Zacks Rank #2 (Buy). Other favorably-ranked stocks in this sector include Grupo Aeroportuario del Pacifico S.A.B. de CV (PAC), Matson, Inc. (MATX), and Echo Global Logistics Inc. (ECHO). Both Grupo Aeroportuario and Matson sport a Zacks Rank #1 (Strong Buy) while Echo Global Logistics carries a Zacks Rank #2.
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