Heartland Express said today that it plans to purchase truckload operator Great Coastal Express. Terms were not disclosed, though Great Coastal generated some $70 million in revenue last year.
Coralville, IA-based Heartland expects to acquire approximately 428 tractors and 1,664 trailers along with other assets. Heartland added that it plans to sublease 68 tractors and also obtain access to approximately 125 owner-operators and will lease terminals in Chester and Roanoke, VA, Baltimore, and Charlotte NC. Should the deal close as expected on June 1, Great Coastal will continue to operate out of its Chester, VA headquarters as a division of Heartland.
The acquisition is a departure for Heartland, a carrier that is something of a darling on Wall Street. According to a profile in The Wall Street Journal, Heartland averages profits of 12 to 13%, compared to between 3 and 7% in the truckload industry as a whole. The carrier has no debt, more than $153 million in the bank, and the trucks in its fleet of 2,000 average only 18 months of age.
Company founder Russell Gerdin has been stingy in terms of expansion. He has bought only four carriers since 1986, according to The Journal.
Gerdin also credits Heartland's success to dominating the short-haul truckload market, running routes that average only 558 miles. That may now change with the addition of Great Coastal, a carrier located well outside Heartland's traditional Midwest territory.
"For several years we have felt that Great Coastal would be a good fit with Heartland," Gerdin said. "Great Coastal's presence in the Mid-Atlantic from Maryland to the Carolinas and West through Pennsylvania and Ohio will add critical lane density in that region."
Gerdin added that the company gained a desirable customer list that has little overlap with Heartland's and expects to retain and build as much of the existing business as possible.
Gerdin added that he expects it will take a couple of years to bring the operating ratio of Great Coastal into the mid-to-upper 80's. Heartland's ratio hit 81.3 in the first quarter, one of the industry's best, and he believes the deal will add to Heartland's earnings within six months.
For the first quarter of this year, Heartland's revenue jumped 1.9% to $73.3 million, with net income rising 6.8% to $9.5 million.
