Dive Brief:
- ArcBest Corp.’s network of 240 LTL service centers across the U.S. would likely be its primary value in any acquisition by TFI International, according to Spencer Tenney, president and CEO of The Tenney Group, a trucking M&A firm with more than a dozen deals in the pipeline.
- TFI, a Canada-based logistics giant, disclosed its purchase of more than 1 million shares of ArcBest stock in Q4, prompting speculation it is angling for a potential acquisition. A deal could allow TFI to merge the 181-terminal network of TForce Freight, the LTL company it bought from UPS in 2021, with ArcBest’s ABF Freight LTL carrier.
- “It’s very cost-prohibitive to grow and build out terminals,” Tenney said. “So to be able to kind of lay these networks on top of one another and cherry pick — ‘What are the most efficient terminals that have the highest capacity for growth?’ — and then reducing the duplicate terminals as part of that? I think that's just a really smart play to be thinking about.”
Dive Insight:
Montreal-based TFI has not shied from big deals in the past.
In its $800 million acquisition of UPS Freight in 2021, the company’s executives said they would rely on lessons learned in its purchase of CFI from XPO in 2016 — primarily how to cut money-losing freight.
But Satish Jindel, an LTL consultant and observer, doubts a takeover of ArcBest is in the works. When companies acquire others, they rarely do so publicly, he noted.
“[TFI] didn't cross the 5% threshold that required them to file,” Jindel said. “So they did it to just get some rumors started. They have accomplished that.”
If a deal occurred, TFI would presumably face a similar scenario to that of Yellow, which is in the process of selling 28 terminals and consolidating its subsidiaries in its One Yellow network overhaul.
Like Yellow, TFI must negotiate changes to its TForce Freight LTL network with the Teamsters union. The union has represented the carrier’s workers since UPS acquired the longtime union-free Overnite Transportation Corp., which was founded in Richmond, Virginia, by J. Harwood Cochrane in 1935.
It’s another reason Jindel is skeptical of a pending acquisition.
“Historically, [for] every union company that has acquired another union company, it has not worked out well,” he said.
The Tenney Group forecasts a busy, if slightly cooler, M&A environment for trucking in 2023, underpinned by more low- and middle-tier deals than major mergers. But splashy, large-scale moves, including Knight-Swift’s acquisition of U.S. Xpress announced this week, can help drive additional M&A interest — even if in a more indirect way.
"Large, very public transactions, they do create some imagination for folks to kind of rethink their use and growth strategies and potentially reinvent themselves a little bit in terms of how they want to approach the future," Tenney said. "It does kind of give license to folks to integrate [M&A] into their playbooks and get a little bit more bold in the way they think about growth."
