Dive Brief:
- Covenant Logistics Group completed an approximately $100 million acquisition on Wednesday of a poultry business carrier, which operated approximately 225 trucks.
- The deal also includes up to a $30 million earnout for Lew Thompson & Son Trucking, depending on results over the next three calendar years, according to a company announcement.
- “We pursued this acquisition because it aligns with our strategic plan of becoming a nicher well-diversified service provider in a market that is less sensitive to typical freight cycles,” CFO Tripp Grant said on the company’s Q1 earnings call April 28.
Dive Insight:
Lew Thompson & Son Trucking is based in Northwest Arkansas and serves surrounding areas, but Covenant executives see potential to expand that.
“There are ... opportunities for growth, not only in the region they operate, but expanding that into other regions with the same customers and new customers because they've just got a stellar reputation and provide a really great product,” President and COO Paul Bunn said on Covenant’s earnings call.
Covenant pursued the deal because of the carrier’s track record in a niche market for a dedicated contract carrier. Executives said they thought it was less susceptive to recessions, too.
Despite an economic downturn, several trucking companies have announced acquisitions in the past few months. Notable deals include Knight-Swift Transportation Holding moving to acquire U.S. Xpress Enterprises and Jones Logistics’ acquisition of Nationwide Express.
Covenant completed the deal through a 100% outstanding stock purchase, using $45 million in available cash and borrowing about $55 million from a credit facility, according to the announcement.
Grant said he thinks the company has been very disciplined in how it’s approached M&A during recent years.
“We're not actively kind of hungry and looking for immediate M&A opportunities,” he said. “But ... if the right thing came along, it could be possible, whether it's in Dedicated or one of the other segments.”
