Garrison Delivers Value in FedEx Sale (Jeff Hankins Publisher’s Note)

Sheridan Garrison knows timing.

When the trucking industry was being deregulated in the 1980s, he seized the opportunity to form Arkansas Freightways in Harrison and become a bigger player in the less-than-truckload shipping business.

With the stock market in a tailspin and the economy crawling, Garrison and fellow stockholders in what became American Freightways Corp. can find comfort knowing they received an attractive deal in the company’s $1.2 billion sale to FedEx Corp. of Memphis. Not many investors have enjoyed a 61 percent rise in stock price — the premium FedEx paid — in the past year.

That’s not to say it was the easiest decision in the world. During a visit with me last week at his Harrison office, Garrison became nostalgic and clearly expressed bittersweet feelings. I’ve seen and heard the emotions time and again from entrepreneurs who have grown a family business, positioned offspring to take over the leadership and then faced the prospect of putting business ahead of heart.

Fred Smith, the CEO and founder of FedEx, didn’t immediately win over Garrison and his sons with the prospect of a sale. It took two years for Smith to convince them to become willing sellers.

Garrison’s brother, Ben, had warned him a few years ago that he would be courted for a sale by the likes of Smith and it would be a difficult decision.

Sale negotiations were new territory for Garrison, but he and his team delivered an impressive performance. The trend during the past decade was acquisitions and mergers to build companies, but Freightways wasn’t a player. The company chose to grow state by state, launching one terminal after another with its own proven systems without having to absorb other company cultures and baggage.

FedEx’s other less-than-truckload subsidiary, Viking Freight, just so happened to be well-established in the only territory Freightways had not yet pursued — the West Coast — so the acquisition is a perfect fit. Freightways instantly brings strong technology systems to the party and is taking the lead in the assimilation of the trucking operations.

Change is inevitable for Freightways and its employees. Already the company is working on its first-ever budget — a practice that didn’t exist under the Garrison regime, which chose to focus on expenses as a percentage of revenue as its financial guideline. FedEx voluntarily included a clause in the agreement to keep operations in Harrison, so that seems to be providing a sense of stability. Executives have three-year deals to stay on board.

Focused Without Unions

Garrison notes that the lack of unionization is among the contributing factors in the company’s success and competitiveness. But more importantly, he says, the company focused on itself and customers instead of the competition.

Hanging on the walls of Garrison’s executive suite, amid awards and framed magazine stories, are drawings that appeared in Jones Truck Lines (now defunct thanks to the company that bought out the late Harvey Jones) and Yellow Freight company newsletters years ago. They depicted Freightways as monster-like competitor and in Garrison’s view demonstrated a misguided focus.

Freightways’ success certainly had bumps along the way. After rolling to nearly $25 a share in 1994, the stock slumped for the next five years as overly aggressive expansion took its toll. The company regrouped and came away stronger and more attractive.

Now Freightways’ competitors face a company with the sizable muscle, additional resources and branding of FedEx. The foundation exists to take what started as a small family trucking company and create a global less-than-truckload shipping operation.

That’s an appealing prospect and potential legacy for Garrison.

It’s also ironic that Garrison’s suitor turned out to be one of his heroes in business. He says he always admired the fact that Fred Smith created not only a product but a market for the product.

Garrison didn’t create the less-than-truckload shipping industry, but he has to be admired for building one of the nation’s premier trucking companies that raised the bar for the industry — and for giving us another incredible business success story in Arkansas.

Jeff Hankins can be reached via e-mail at [email protected].