Con-way to Acquire CFI

July 18, 2007
In a move that will greatly enlarge Con-ways truckload capabilities and enhance Menlo Logistics truckload spend, the $4.2 billion San Mateo, CA-based

In a move that will greatly enlarge Con-way’s truckload capabilities and enhance Menlo Logistics’ truckload spend, the $4.2 billion San Mateo, CA-based transportation company announced an agreement to acquire Contract Freighters Inc. (CFI) of Joplin, MO.

Douglas Stotlar, president and CEO of Con-way acknowledged in a call to analysts that the company’s business had changed when the original holding company spun off nationwide less-than-truckload (LTL) carrier CF. At the time, the holding company behaved like a holding company and didn’t look at the opportunities to link parts of the operating companies. Intermodal and truckload didn’t have critical mass, so they exited that business. Then a couple of years ago, management looked at how operations could be integrated across its various transportation platforms and concluded it was time to get into the truckload business again.

At the time, Con-way said the truckload division would primarily handle Con-way’s line haul moves, and that’s largely what has happened. But Con-way sees a further opportunity to develop synergies for its third-party logistics unit Menlo Logistics. Deconstructing the relationships is a little complicated since neither privately held CFI nor Con-way would offer specific numbers before the deal is concluded.

CFI reportedly had $427 million in revenues in 2006. Menlo manages $600 million in domestic truckload transportation services on behalf of customers. Con-way Truckload accounts for roughly $90 million in truckload revenues, 90% of which is line haul moves for Con-way. When it all comes together, Con-way, which is CFI’s biggest customer at about 6% of the truckload carrier’s revenues, will benefit from more linehaul capacity and CFI’s strong connections into and out of Mexico. Menlo will have access to truckload assets at CFI at competitive rates for its customers and its contract moves. CFI will be able to balance some traffic using Con-way and Menlo freight and improve its efficiency while commanding a better rate than if it had to broker capacity to avoid empty backhauls.

Asked about CFI’s flat growth, Herb Schmidt, CEO, said the carrier had limited its growth in the last few years and concentrated on margins. Though he wouldn’t give an exact number, he responded positively to the suggestion that CFI’s operating ratio was under 90.

CFI currently operates 2,600 tractors and has about 300 new tractors it acquired during a pre-buy ahead of the 2007 emissions requirements. It has been introducing the tractors from that pre-buy into its network as replacements and, says Schmidt, it will continue to do so.

Upon completion of the deal, Con-way will begin reporting truckload results separately, but until then, both companies avoided releasing any more specific figures.

Latest from Global Supply Chain