Con-way buying CFI

Con-way Inc. plans to buy privately held truckload (TL) carrier Contract Freighters Inc. (CFI) for $750 million in a bid to build its presence in the truckload market

Con-way Inc. plans to buy privately held truckload (TL) carrier Contract Freighters Inc. (CFI) for $750 million in a bid to build its presence in the truckload market and beef up the services offered by its Menlo Logistics subsidiary.

“As many know, we’re very intent on increasing our presence in the TL sector,” said Douglas Stotlar, Con-way president & CEO, today in a conference call with analysts and reporters.

“By integrating CFI into our company, we’ll eliminate duplicative administrative and operational functions with our existing TL business, retain profitable contracts with current CFI customers, and use CFI’s trans-border expertise throughout our LTL [less-than-truckload], logistics, and warehousing businesses,” he added. “We see the combination of ourselves with CFI as creating both a strong platform for growth and synergies to better optimize usage of our current assets and resources.”

The deal will be structured as a merger, with San Mateo, CA-based Con-way acquiring CFI’s parent company, Transportation Resources, and all other subsidiaries, funded roughly 50-50 with cash on hand and debt financing, said Kevin Schick, Con-way vp-finance & CFO. Schick added that the deal should close in the third quarter, if Con-way’s shareholders approve and the company gets the appropriate regulatory approvals.

Herb Schmidt, president & CEO of Joplin, MO-based CFI, said he and his entire management team will stay in place following the merger, which he believes offers CFI many opportunities.

“Becoming part of the Con-way organization will allow us to penetrate new markets and provide new services to our customers,” Schmidt said. “We think that our combined operations will make us a force to be reckoned with in the truckload market – we really complement each other across many areas.”

Founded in 1951, CFI now operates over 2,600 tractors and more than 7,000 trailers. It employs more than 3,000 persons including approximately 2,500 drivers throughout North America. Schmidt said CFI currently has 300 new trucks that were pre-bought ahead of the 2007 emissions regulations that are replacing older tractor models at a rate of 11 vehicles per week.

The financial benefits of the deal-- especially how it affects Con-way’s profitability-- won’t be released until the deal closes, said Stotlar, largely because CFI is a private company. He stated that CFI is debt free so Con-way won’t be assuming any debts because of the acquisition. Stotlar noted that of CFI’s $427 million gross revenues posted for 2006, roughly 40% came from Mexico-related freight and 7% from contracting with LTLs to carry long-haul freight – with Con-way’s LTL operations representing 6% of that 7%.

“This acquisition is a cornerstone of our strategic plan to grow the company, build competitive advantage, and increase shareholder value,” said Stotlar. “It joins CFI with our existing Con-way Truckload division, creating a business unit with over $500 million in annual revenues for truckload freight. Together with the complementary capabilities of our LTL subsidiary, Con-way Freight, and Menlo Logistics, we can deliver an expanded transportation and logistics platform to North America-based shippers as well as global businesses, from ‘first-mile’ sourcing in Asia or Europe, to ‘last-mile’ delivery in North America.”

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