Arkansas Best Buys Panther In $180 Million Deal

Arkansas Best Corp. has purchased Panther Expedited Services in a $180 million deal that ABC officials say will help them better tap the $700 billion transportation and logistics market, and will begin to add to the bottom line as early as the third quarter.

The deal is expected to close Friday (June 15). Panther is owned by New York City-based Fenway Partners.

Execs at Fort Smith-based Arkansas Best, the parent company of ABF Freight System, have in recent years sought to diversify the company. ABF — one of the largest less-than-truckload carriers in the U.S. — was responsible for $1.73 billion of the $1.907 billion in revenue Arkansas Best posted during 2011.

Arkansas Best posted 2011 net of $6.159 million, a huge swing from the $32.693 million loss during 2010. The 2011 financials marked the end of two consecutive years of income losses.

Despite significant financial losses in the past few years, Arkansas Best holds enough cash to acquire new operations without loading up on debt. As of March 31, cash and cash equivalents at Arkansas Best totaled $138.5 million, and short-term investments — which could be quickly liquidated — totaled $45.2 million. The two funds provide Arkansas Best with $183.7 million of “unrestricted cash and short-term investments,” down from about $209 million at the end of the first quarter of 2009.

The company plans to pay for the $180 million deal with a five-year $100 million loan and with $80 million in cash.

Seville, Ohio-based Panther should not only help the company diversify revenue, but may be a necessary acquisition as the company competes with the larger shipping companies. According to Arkansas Best, Panther is North America’s largest independent expedited transportation and logistics company. Panther posted $215 million in total revenue in 2011 and $24 million of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). Panther’s EBITDA has averaged more than $20 million since 2006 “despite the recent economic downturn,” noted the Arkansas Best press release.

“Panther Expedited Services is an excellent strategic fit for our company and our customers as we seek to offer end-to-end logistics solutions for progressively more complex supply chains,” Arkansas Best President and CEO Judy McReynolds said in a statement. “We are very enthusiastic about this unique transa

ction, which met all of our criteria for growth among many options we analyzed for several years.”

In an internal memo to employees, McReynolds provides more specifics about how the deal will benefit Arkansas Best.

“Panther’s services also include an expanding premium logistics product that involves the rapid deployment of highly specialized equipment to meet extremely specific linehaul requirements — such as temperature-controlled, hazardous materials, geo-fencing, secret and classified government cargo, security equipment and life sciences. Panther’s premium logistics services, along with its forwarding services for air and ocean freight, provides numerous additional options to be the end-to-end solutions provider desired by many customers,” McReynolds noted in the memo.

As a logistics company, Panther does not own trucks or other capital-intensive equipment. Rather, they provide transportation and shipping solutions to more than 11,000 customers worldwide, according to the company’s website. Panther works with more than 5,000 ground and air carriers to provide shipping logistics.

“With Panther operating as a sister company to ABF Freight System, our core LTL business, we are better positioned to serve as a premier one-source logistics partner to our customers as their shipping needs rapidly evolve. Importantly, we are also creating a more flexible cost structure required to compete in today’s demanding global marketplace,” McReynolds said in the statement.

Andrew Clarke, president and CEO of Panther, and the rest of the Panther management team will remain in their roles.

“Both our companies have expedited transportation solutions, but with different, complementary operating models and minimal customer overlap,” Clarke noted in the statement. “Upon the close of this transaction, Panther employees will have access to a much broader sales organization nationwide and a parent company with significant resources.”

Shares of Arkansas Best (NASDAQ: ABFS) closed Wednesday at $10.96, down 49 cents. During the past 52 weeks, the share price has ranged from a $27.44 high to a $10.95 low. The low was set Wednesday during intraday trading.

Michael Tilley with our content partner, The City Wire, is the author of this report. He can be reached by email at [email protected].