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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