TRUCKIN' FOR A BIGGER FOOTPRINT

By: Bubbajunk.com

Equity buyer combines Dawes, Roadrunner

 

Roadrunner Freight Systems Inc and Dawes Transport Inc will be merged after a Washington, D.C. private equity firm closed separate deals recently to purchase the local trucking companies.

 

The merger will provide Roadrunner-Dawes immediate expansion of the national footprint for both companies, bolstering their ability to be more responsive to customer needs, said Alan McBride, president and chief executive officer of Dawes Transport, who will hold the same titles with the merged companies.

 

Thayer Capital Partners purchased Cudahy-based Roadrunner Freight Systems from American Capital Strategies Ltd., a Bethesda, Md., buyout firm, in a deal that closed April 29. American Capital had purchased a controlling interest in RoadRunner in July 2003.

 

Thayer purchased Milwaukee-based Dawes Transport from the Murphy family in a deal that closed in March 31.

 

Terms weren't disclosed for either transaction.

 

The combined companies will operate as RoadRunner-Dawes. The merger of the carriers creates a company that is expected to generate revenue of nearly $365 million in 2005. Individually Dawes had been expected to generate $202 million in revenue this year, with RoadRunner's sales expected to be about $163 million.

 

Barry Turner, president of RoadRunner Freight, will server as chief operating officer. McBride, who took over as president and CEO 10 years ago, said he has been pushing for a merger between Dawes and RoadRunner for several years. "I thought the deal should have been put together for a long time," he said. "It's natural marriage."

 

MULTIPLE TERMINALS

 

RoadRunner runs terminals in Milwaukee; Atlanta; Charlotte, N.C.; Chicago; Cleveland; Dallas; Los Angeles; and Nashville, Tenn.

 

Dawes has terminals in Milwaukee; Chicago; Cincinnati; Cleveland; Dallas; Detroit; Indianapolis; Portland, Ore.; St. Louis; San Francisco; and Seattle.

 

The terminals will be merged in cities where Dawes and RoadRunner overlap, McBride said. The Cleveland terminals already have been combined at a single location. The lone exception will be in Los Angeles area, where both terminals will remain open.

 

"There's tremendous growth, potential in Los Angeles," McBride said. "It is just a huge market."

 

RoadRunner-Dawes also plans to open a terminal to serve the Philadelphia and southern New Jersey region.

 

For now, the merged company will continue to run the RoadRunner terminal on Pennsylvania Avenue in Cudahy, near General Mitchell International Airport, and the Dawes Terminal at 9160 N. 107th St. on Milwaukee's far northwest side.

 

However, the company plans to eventually consolidate its Milwaukee operations at a single-site after long-term leases at both existing facilities expire, McBride said. Neither of the existing terminals is large enough to accommodate the consolidation, so RoadRunner-Dawes will be looking for a new terminal in metropolitan Milwaukee. Consolidating the Milwaukee operations could take several years, McBride said.

 

The merged companies will have a total of about 1,000 employees nationwide. Including 200 in the Milwaukee area. No layoffs are planned, McBride said.

 

SENSIBLE PLAN

 

Combining RoadRunner and Dawes "makes a lot of sense," said Dick Armstrong, president of Armstrong & Associates, a Stoughton logistics consulting firm. "These companies have had similar operating models since their inception," he said. RoadRunner and Dawes historically posted fixed operating costs due to the heavy use of owner-operated vehicles, which means the companies haven't had to spend money to maintain the own fleet of trucks," Armstrong said.

 

"Both companies have had very decent profitability," he said. Armstrong said he expects RoadRunner-Dawes to grow, but at a nominal rate due to the maturity of the market and increased competition from shippers such as Atlanta-based United Parcel Service Inc, and Memphis-based FedEx Corp.

 

RoadRunner-Dawes will continue to focus mainly on providing delivery service of less-than-truckload shipments in which it takes loads for several customers to destinations of more than 500 miles. The company ships direct to customers without stopping at a break bulk, a large terminal where freight is sorted and reloaded.

 

McBride said he expects Thayer Capital to maintain ownership of RoadRunner-Dawes for five to seven years.

 

Thayer manages three private equity funds totaling approximately $1.5 billion. The firm manages buyouts, consolidations and growth equity investments focusing on industrial products and services.

 

Thayer Capital management didn't return calls seeking comment.

 

MILWAUKEE ROOTS

 

RoadRunner began operating in 1984 with a single terminal in Milwaukee. Dawes got its start in 1981 with the creation of a Milwaukee terminal with direct service to California.

 

Management of American Capital Strategies, which help the controlling interest in Roadrunner, didn't return a call seeking comment. Members of the Murphy family, which founded and continued to own Dawes until the recent sale, couldn't be reached for comment.

 

Dawes and Roadrunner were ranked 95th and 100th respectively, in 2004 edition of Transport Topics' top 100 U.S. and Canadian carrier listing. Combined, they would have ranked 50th overall and 16th in the less-than-truckload sector, according to the industry trade publication.