Going Private In 2008 – The Odds

Transport Topics
3/31/2008

Byline Article from Gary Ciuba, Managing Director

Depressed stock prices and strong credit markets created a great environment for public truckers interested in going private. In the first five months of 2007, private equity acquired 16 for-hire carriers, more than all of 2006 (Source: Transport Topics, July 23, 2007). Fully leveraged debt deals were also in evidence, as companies like Swift Transportation went private under management buyouts. In fact, five of the top 10 truckload carriers are now privately held.

However, by the end of 2007 and into early 2008, favorable lending conditions dried up. Banks shied away from lending to corporate clients and private equity firms had difficultly persuading banks to underwrite their takeovers. Compounding these macro-economic issues, the trucking industry experienced an increasingly difficult operating environment, attributable to a disappointing peak season, high fuel prices/insurance, driver shortages and a truck capacity glut. Today, trucking companies’ stock prices have proven volatile to the downside; trucking company stock can now be found trading near book value. So where does that leave trucking companies interested in going private? Recognizing industry headwinds, debt and equity investors are likely unwilling to take an asset-based carrier private. If a major shareholder decides to engineer the buyout, it is still not a guaranteed success given the tenuous market conditions.

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