Transportation And Logistics Industry Update Spring 2020
INDUSTRY UPDATE Spring 2020
Houlihan Lokey Transportation and Logistics UpdateDear Clients and Friends,Houlihan Lokey is pleased to present its Transportation and Logistics Spring 2020 Industry Update. As theCOVID-19 curve begins to flatten, national and local governments ease restrictions and economies start toopen at different rates around the globe, the outlook for subsectors within the transportation and logisticsindustry is varied. Coupled with unprecedented turmoil in energy markets, uncertainty is likely to persistuntil the duration and overall impact of recent events can be determined.We have included in this newsletter important news stories, transaction announcements, a public marketsoverview, and industry insights to help you stay ahead in our dynamic and constantly evolving industry. Asthe market environment has shifted in light of COVID-19, so too have our conversations with clients. Apre-crisis focus on sellside M&A has given way to discussions regarding debt capital markets,liquidity preservation, and opportunistic buyside M&A strategies.We hope this quarterly update serves as a valuable resource to you in staying abreast of the market, andwe look forward to staying in touch with you.Regards,Kris HopkinsDirectorHead of Transportationand LogisticsKHopkins@HL.comO: 212.497.7856M: 617.784.7934Phil Keffer, CFAVice PresidentTransportation andLogisticsPKeffer@HL.comO: 212.497.7851M: 973.224.3476Houlihan Lokey245 Park Avenue, 20th FloorNew York, NY 10167Additional ContactsJason WeisbaumAssociateJWeisbaum@HL.com212.497.4265Matt GlaswandAssociateMGlaswand@HL.com212.497.4158Yash SrivastavFinancial AnalystYSrivastav@HL.com212.497.7863Coleman KraemerFinancial AnalystCKraemer@HL.com646.259.7448Industry Subsectors CoveredAsset-Light/Third-Party t LeasingMarine Services andTransportationHelicopter Operatorsand Other AviationRail and Services2
Houlihan Lokey is the trusted advisor to moretop decision-makers than any otherindependent global investment bank.Houlihan Lokey is the trusted advisor to more topdecision makers than any other independent globalFinancial and ringCorporate Finance2019 M&A Advisory RankingsAll U.S. Transactions2019 Global Distressed Debt & BankruptcyRestructuring RankingsAdv isorDeals1Houlihan Lokey1842Goldman Sachs & Co1673JP Morgan14145Morgan Stanley122Evercore Partners112Source: Refinitiv (formerly known as Thomson Reuters)Top 10 Global M&A AdvisorLeading Capital Markets AdvisorAdv isorDealsAdvisorDeals1Houlihan Lokey761Houlihan Lokey1,0572PJT Partners Inc432JP Morgan9293Moelis & Co363Duff & Phelps734294Morgan Stanley6215Bank of America Merrill Lynch61245LazardAlixPartners19Refinitiv (formerly known as Thomson Reuters). Announcedor completed transactions.Source: Refinitiv (formerly known as Thomson Reuters)No. 1 U.S. M&A Advisor2000 to 2019 Global M&A FairnessAdvisory RankingsNo. 1 Global Investment BankingRestructuring AdvisorNo. 1 Global M&A Fairness OpinionAdvisor Over the Past 20 Years1,000 Transactions CompletedValued at More Than 2.5 Trillion Collectively1,000 Annual Valuation EngagementsSelected TransactionsSeries ASenior Secured Noteshas completed a restructuringthrough English schemes ofarrangement, a U.S. Chapter 15filing and Canadian CCAAhas acquiredhas been acquired by affiliatesof Solus Alternative AssetManagement through an incourt asset sale pursuant toSection 363 of the BankruptcyCodeGrowth Capitalhas confirmed a Chapter 11Plan of Reorganization, raising 225 million pre- and postpetition financing and 385million of equity via rightsofferinghas merged witheach a portfolio company of 50,000,000Creditor AdvisorExclusive Financial Advisor & Placement AgentBuyside AdvisorCompany AdvisorFairness Opinionhas sold substantially all of itsassets for 650 million, pursuant toa court-approved sale toa joint venture ofhas confirmed a Chapter 11Plan of Reorganization,restructuring 700 million ofdebt and raising 225 millionof new debt and up to 75million of new equityCompany Advisora portfolio company ofhas been acquired byhas divested its subsidiaryhas been acquired byhas acquiredand secured lenders of certain debtfacilities pursuant to Section 363(k)of the US Bankruptcy CodeCompany AdvisorBuyside AdvisorSellside AdvisorSellside AdvisorCompany AdvisorSellside Advisor3
Significant News StoriesLOGISTICSDivided Supply Chains Are Challenging Producers, Retailers(The Wall Street Journal, April 15, 2020)“Experts say there is plenty of toilet paper and food in the U.S. But rerouting goods to consumers that wereproduced at industrial scale—big toilet paper rolls for college dormitories or yogurt bound for factories that churnout breakfast parfaits—involves more than a phone call or quick email exchange. Wholesalers that sell toboth retail and food-service customers can try and leverage existing relationships with grocers to offload somebulk products. But stores configured to sell consumer-size goods may not have space to store and display heftysacks of rice and giant jars of mayonnaise.” (Link to article)Online Grocers Are Getting a Preview of Their Future(The Wall Street Journal, March 27, 2020)“Since the pandemic began, the websites of major food retailers have been as inundated as their physicalstores. The number of U.S. households ordering groceries online roughly doubled this month to 40 millioncompared with levels recorded in August 2019, data released Thursday by consulting firm Brick Meets Clickshows. Although supermarkets have invested heavily in their online businesses in recent years, they are notready for current levels of demand. Infrastructure is still immature globally: 7.6% of groceries in the U.K. werebought over the web before the outbreak, while in Spain just 2.4% of sales have moved online, according toKantar data. The U.S. has around 3.1% penetration.” (Link to article)Costco Acquires Last-Mile Specialist Innovel for 1 Billion(Supermarket News, March 17, 2020)“Boosting its last-mile capabilities, Costco Wholesale Corp. has bought third-party delivery and logistics providerInnovel Solutions for 1 billion in cash. Innovel has for decades provided Sears with ‘final mile’ delivery of bigand bulky products, along with installation and ‘white glove’ support services, across the United States andPuerto Rico. More recently, Innovel has begun serving other customers, including Costco since 2015. Productsdelivered and serviced by Innovel include major appliances, furniture, mattresses, televisions, grills, patio,fitness equipment and wine cellars.” (Link to article)CRST Buys New Jersey-Based Final-Mile Logistics Company NAL Group(Transport Topics, March 3, 2020)“CRST International on March 2 announced it had acquired final-mile specialist NAL Group. Financial terms ofthe agreement were not made public. NAL Group is headquartered in Edison, N.J., and most of the company’sbusiness is in warehousing services and final-mile delivery of big and bulky consumer durables, complex inhome installation and assembly services and express courier services.” (Link to article)ASSET-BASED TRUCKINGFor America’s Small Truckers, Demand Is ‘Falling Off a Cliff’(The Wall Street Journal, April 21, 2020)“Sam Trucking is among thousands of small trucking companies that move the vast majority of the goods in U.S.freight markets. With light cash flow, limited reserves and uncertain access to credit, many of those carriers noware struggling under an upheaval in shipping markets created by lockdowns on economic activity meant tocontrol the coronavirus pandemic. Fleets of all sizes are getting hit by the downturn, and some big nationaltrucking companies are slashing executive pay and pulling back spending.” (Link to article)4
Significant News Stories (cont.)MARINEOil Traders Are Scrambling to Book Tankers for Storage(The Wall Street Journal, April 21, 2020)“The growing surplus of oil on world markets has traders racing to find supertankers to use for storage, pushingrates for the mammoth vessels sharply higher even as prices for crude continue to dive. Robert HvideMacleod, chief executive of Norway-based Frontline Management AS, one of the world’s biggest tanker owners,said average daily freight rates for VLCCs are hovering at around 150,000, compared with average rates ofabout 10,000 a day in April 2019. Daily freight rates are far above the average 25,000 daily break-evencosts for VLCCs, but shipping executives say they expect the windfall won’t last long because crumbling oilprices will push producers to slash output in the coming months.” (Link to article)Maersk Buying US Warehousing and Distribution Company(American Shipper, February 19, 2020)“A.P. Møller – Maersk said Wednesday it had agreed to buy U.S. warehousing and distribution firmPerformance Team in a 545 million deal. ‘With this acquisition we invest in premium operational capabilitiesto significantly boost our existing Warehousing and Distribution offering. This will strengthen our ability to deliverproducts and solutions that meet our customers’ end-to-end supply chain needs,’ Maersk Ocean and LogisticsCEO Vincent Clerc said in a statement. Maersk said it is targeting the Warehousing and Distributioncomponent to offer more supply chain options and flexibility to its Ocean customers and noted that e-commercein North America is growing at a rate of 12% annually.” (Link to article)AUTOMOBILESAutomakers Will Need Months to Restart Factories(Transport Topics, April 15, 2020)“Automakers are anxious to get their assembly lines rolling again, especially since leaving factories idle iscosting them billions of dollars by the week. But the experience many of them have had in China illustrates justhow long a slog it’s going to be before plants are producing at anywhere near pre-shutdown levels. It took almosttwo months for most of China’s industry to return to some semblance of normalcy—and that was with the benefitof mobile apps the government installed on citizens’ cellphones to track their movements and potential exposureto COVID-19 infected people.” (Link to article)TRANSPORTATION EQUIPMENT LEASINGStonepeak Infrastructure Partners to Acquire TRAC Intermodal(American Shipper, February 20, 2020)“Private equity firm Stonepeak Infrastructure Partners, which is based in New York City, has signed anagreement to acquire TRAC Intermodal from a Fortress Investment Group affiliate. Financial terms for theagreement, which is subject to customary closing conditions and regulatory approvals, were not disclosed.TRAC’s existing management team will remain to run the business, TRAC said on Feb. 18. Both parties willbenefit from the acquisition, according to Princeton, New Jersey-based TRAC. Stonepeak’s support will enableTRAC to grow the company’s presence in North America. TRAC operates 180,000 marine chassis nationwide,with an operating footprint of over 650 locations. TRAC also has three subsidiaries: TRAC Tire Services, whichsupplies tires and parts; FYX, an emergency fleet roadside assistance offering; and TRAC Services, whichprovides maintenance, repair and depot services to intermodal and over-the-road customers.” (Link to article)5
Significant News Stories (cont.)AVIATION AND AIR CARGOFAA Issues Guidance for Cargo in Passenger Cabin(American Shipper, April 16, 2020)“The Federal Aviation Administration is giving airlines the greenlight to carry cargo in the passenger cabin tomaximize efficiency and relaxing takeoff and landing quotas at congested airports. The agency on Thursdayissued guidelines for commercial carriers to follow if they transport cargo in stowage bins, passenger seats oron the floor, with the seats removed. The safety alert essentially tells carriers they can carry shipments up topas long as they adhere to all regulatory requirements for the safe carriage of cargo. Passenger cabins are notdesigned for all-cargo configurations, but the rules allow goods to be carried there if all normal requirements forthe safe carriage of cargo are followed.” (Link to article)Crippled Airline Industry to Get 25 Billion Bailout, Part of It as Loans(The New York Times, April 14, 2020)“The Trump administration has reached an agreement in principle with major airlines over the terms of a 25billion bailout to prop up an industry hobbled by the coronavirus pandemic. The stimulus, passed late lastmonth, largely incorporated the assistance that the industry had sought, including the 25 billion in payrollsupport and another 25 billion in loans for passenger airlines and more than 10 billion in grants and loans forcargo airlines and aviation contractors. But the aid came with some strings attached, including giving Mr.Mnuchin the authority to take an equity stake in airlines that receive the grants. Treasury officials determinedthat 70 percent of the grants to airlines would benefit taxpayers through payroll and income tax receipts and byreducing the unemployment insurance payments that the government would have paid to airline workers hadthey lost their jobs. The remaining 30 percent would not directly benefit taxpayers, and therefore would berepaid as a loan over a period of 10 years, a senior Treasury official said on Tuesday.” (Link to article)TECH-ENABLED SERVICESLyft Launches ‘Essential Deliveries,’ but It’s Not an Uber Eats Competitor(Fast Company, April 15, 2020)“As demand for rides plummets during the coronavirus pandemic, Lyft says it’s now delivering food, medicalsupplies, and other necessities with a new pilot service called ‘Essential Deliveries.’ And, no, it’s currently not aclone of Uber Eats. Instead, Lyft is recruiting drivers to deliver ‘meals, groceries, life-sustaining medicalsupplies, hygiene products and home necessities’ for nonprofit groups, government agencies, and—Lyft wroteon its blog—’businesses and healthcare organizations.’ Lyft says the deliveries will be ‘contact-free,’ and it plansto pay drivers as if they were fulfilling standard rides.” (Link to article)FourKites Buys Yard Management Suite From TrackX Solutions(Logistics Management, March 25, 2020)“Chicago-based FourKites, a provider of real-time tracking and visibility solutions across transportation modesand digital platforms, said today it has acquired the yard management service offerings from Denver-basedTrackX Holdings Inc., an enterprise asset management company deploying SaaS-based solutions gearedtowards the tracking and managing of physical assets. A purchase price was not disclosed. FourKites officialssaid that this acquisition will enable it to develop a new supply chain visibility offering focused on extending realtime visibility into the yard, with TrackX’s Yard Management, Dock Management, and Gate Control solutions,which are the key components of the acquisition.” (Link to article)6
Recent M&A iptionTargetSectorTransactionValue ( M)Apr-20PrologisLogistics Facilities of Nippon Four Japanese logistics facilitiesExpressLogistics 477Apr-20RhenusFreight ForwardingBusiness of L.W.CretschmarProvides freight forwarding servicesLogisticsN/AApr-20Alpine Air Express Inc. (AEIndustrials)Substantially All Assets ofGreat Lakes Aviation, Ltd.Regional airline company headquartered in Cheyenne, WYAviationN/AApr-20J.H. Rose Logistics, LLCStagecoach Cartage andProvides transportation and warehousing servicesDistribution, LLC(Roadrunner TransportationSystems)LogisticsN/AMar-20FourKites, Inc.Yard Management Business Provides yard management servicesof TrackX Holdings Inc.LogisticsN/AMar-20Central Freight Lines, Inc.Volunteer Express, Inc.Provides truckload freight servicesLogisticsN/AMar-20The Jordan Company, L.P.Transportation Impact LLCProvides small parcel negotiations and freight managementservicesLogisticsN/AMar-20VeeZu LimitedGo Beyond Group LtdDevelops and offers Go Carz, an application for booking andhiring taxisPassengerTransportationN/AMar-20Bulkmatic TransportCompany Inc.Assets of Paris TransportInc.Provides logistics services through its trucks, dry vans, andpneumatics tanks for hauling local grain productsLogisticsN/AMar-20Costco WholesaleCorporationInnovel Solutions, Inc.(Transform Holdco LLC)Provides supply chain solutions to retail, manufacturing,commercial, and military markets in the U.S.Logistics 1,000Mar-20XPO LogisticsMajority of ContractLogistics Operations in theUK of Kuehne NagelInternationalProvides integrated logistics services in the U.K.LogisticsN/AMar-20National Express LimitedLucketts Travel LtdProvides coach and bus travel servicesPassengerTransportationN/AMar-20American Trailer RentalGroup (Milton StreetCapital)Advantage Trailer, LLCProvides semi-trailer rental and sales servicesEquipment LeasingN/AMar-20CRST International, Inc.NAL Group, Inc. (GraycliffPartners)Provides last-mile delivery, dispatch, simple and complexinstallation, warehousing, and direct fulfillment servicesLogisticsN/AMar-20TFI International Inc.Courier Services BusinessOf R. R. Donnelley & SonsCompanyProvides courier services to the pharmaceutical, healthcare,retail, financial, and transportation industriesLogisticsN/AMar-20WillScot Corporation (TDRCapital)Mobile Mini, Inc.Provides portable storage and specialty containment solutionsFeb-20Blue-Grace Logistics LLC(Warburg Pincus)Anthym Logistics, LLCProvides freight brokerage servicesFeb-20Errands Plus, Inc.U.S. Business of AddisonLeeProvides private taxicab and courier servicesFeb-20Team Drive-Away, Inc.(United Road)IXT Logistics, LLCProvides drive-away truck transportation servicesFeb-20Team Drive-Away, Inc.(United Road)Transportation BookingServices LLCTruck transportation company that offers single unit relocationdrive-away servicesFeb-20Atlas Logistics, Inc. (AltasWorld Group)Feb-20Equipment Leasing ased TruckingN/ASpecialty TruckingN/ATopHAT Logistical Solutions, Provides commercial logistics servicesLLCLogisticsN/ASurf Air Inc.Blackbird Air Inc.Online aviation marketplace that connects passengers, privateplane owners, and charter operatorsAviationN/AFeb-20A.P. Møller - Mærsk A/SPerformance Team LLCProvides logistics and transportation servicesLogistics 545Feb-20Stonepeak Partners LPTRAC Intermodal HoldingCorp. (Fortress InvestmentGroup)Operates as a marine chassis pool manager and equipmentproviderMarineN/A7Sources: S&P Capital IQ, Mergermarket
Public Markets OverviewMedian TEV/LTM EBITDA12.8x11.5x11.1x10.5x9.6x8.9x8.8x ngMarineRailApril engerTransportationApril 202012-Month Indexed Stock Price 19Jul-19LogisticsMarineTransportation Equipment LeasingPassenger TransportationDow Jones Transportation IndexNote: All data as of April 27, 2020.Source: S&P Capital IQOct-19Jan-20Apr-20Asset-Based TruckingRailAviationS&P 5008
Macroeconomic DataQuarter on Quarter Real GDP Growth(1)(2)6%Inventory/Sales Ratio(1)1.425%4%1.383%1.342%1% MoM: YoY: 0.0%(1.4%)1.300%Source: Bureau of Economic AnalysisSource: U.S. Census BureauHousing Starts (000s)(1)(2)ISM Manufacturing %1,20048%1,1001,000 MoM: (22.3%) YoY: 1.4%90046%44% MoM: YoY:(1.0%)(6.2%)42%Source: United States Census BureauSource: Institute for Supply ManagementConsumer Price IndexConsumer Sentiment Index26510526010095255902508524580240235230Source: Bureau of Labor Statistics(1) Seasonally adjusted.(2) Annualized.75 MoM: YoY:(0.2)% 1.5%70 MoM: (11.8%) YoY: (9.5%)65Source: University of Michigan9
Relevant Transportation and Logistics Sector DataIntermodal Volume (000s of Containers)(1)Cass Freight Index1.4Shipments MoM: 0.0% YoY: (8.9%)Expenditures MoM: (4.8%) YoY: u
Houlihan Lokey is pleased to present its Transportation and Logistics Spring 2020 Industry Update. As the COVID-19 curve begins to flatten, national and local governments ease restrictions and economies start to open at different rates around the globe, the outlook for subsectors within the transportation and logistics industry is varied.
Industry Profiles – Logistics & Transportation . The Logistics & Transportation cluster includes industries related to the storage, transportation and distribution of goods. This cluster includes all modes of transport, includingairlines, railroads, shipping and trucking companies, as well as logistics consulting and other supporting industries.
Winnebago County Comprehensive Industry Analysis Logistics/Warehousing Industry 7 For a region to be attractive in the new logistics climate, it must offer alternatives to truck transportation, including air and rail services. Another important trend in the logistics industry is driven by higher customer
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1.9 Third Party Logistics 1.10 Fourth Party Logistics 1.11 Career & Growth in Logistics and Supply Chain 1.12 Summary The unit is an attempt to give idea how logistics works as a system. It also helps to understand about the different elements in logistics system. It also provide an insight about objectiv
4.5 Innovation Strategy and Process in Logistics 18 4.6 Fields of Innovation in Logistics 23 4.7 Key Success Factors for Innovations in Logistics 24 4.8 Innovation Excellence Improvement Potential in Logistics 25 5 Case Studies 27 5.1 Rodenstock 27 5.2 Valeo 28 5.3 Woolworth 29 5.4 APL Logistics 31 5.5 Interporto Rivalta 32
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