Hub Group Acquires Comtrak

Hub Group Inc. announced it would acquire the assets of Comtrak Inc., a rail, intermodal and international drayage company and truckload carrier, for an estimated $38 million in cash. The acquisition will allow Hub Group to enter international markets through Comtrak’s connections with steamship lines, a move which complements Hub Group’s position with many of the retail companies engaged in importing, according to David Yeager, CEO of Hub Group.

Comtrak operates 15 terminals, mainly in the Southeast U.S., said Yeager. He said the acquisition would be beneficial to Hub Group in three ways:

1) Acquiring Comtrak will help Hub increase the amount of drayage it performs. Hub spent $63 million on drayage in 2005. Of that, $8 million was spent with Comtrak (which earned $85 million in drayage in 2005).

2) Working more closely with Comtrak will improve the overall quality of Hub’s intermodal product. Quality Services, the Hub subsidiary, will come under Comtrak’s management.

3) The acquisition allows Hub to enter the international drayage market. Over 25 million import/export containers moved inland in the U.S. in 2005, said Yeager. And even at a conservative estimate of $200 per container, says Yeager, the segment generated over $5 billion in revenues. Much of the market is fragmented, leaving it divided among a number of small, local trucking companies. The one national carrier, explains Yeager, is Bridge Terminal Transport Inc., which operates 37 terminals and 30 container yards. But, he points out, it is a wholly owned subsidiary of the ocean shipping line A.P. Moller-Maersk.

Comtrak has 560 drivers, 55% owner operators, says Yeager. This compares with Hub’s Quality Services group with a similar number of drivers, 68% of whom are owner operators. As Hub seeks to expand drayage operations, drivers and driver acquisition will be a key issue, he continues. Most of Comtrak’s operations are centered in the U.S. Southeast while Hub is largely based in the Midwest. Though Yeager doesn’t rule out a small acquisition to help Hub expand on the West Coast, he says the company already has a presence in Stockton and Los Angeles, California. The goal now, he points out, is to integrate the Comtrak acquisition right.

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