|
|||||
|
Today's News , 2003
• Winning Independence in Tar Heel State Yellow Buys Roadway for $1.1 billion  Reprint permission
Shippers' long-haul options in the unionized LTL sector further diminished in the wake of Yellow Corp's blockbuster buy of Roadway Corp. for approximately $966 million last week. Counting Roadway's $140 million debt, the value of the equity and cash deal is $1.1 billion, making it the most expensive trucking acquisition ever. Yellow-Roadway Corp. would have a combined long-haul LTL market share of nearly 60 percent, though Yellow officials say Roadway will operate as a separate unit, at least initially. The move continues consolidation in long-haul trucking and perhaps opens the door for $32 billion giant United Parcel Service to spend some of its war chest to add LTL capacity with a long-anticipated ground acquisition of its own. FedEx Corp., fast-rising as an option for LTL shippers, also could be prodded into making another buy. The combined Yellow-Roadway Corp. will create one of the world's largest transportation service providers. Yellow Corp. Chairman, President and CEO Bill Zollars will run the new $6 billion concern while James D. Staley, currently president and chief executive officer of Roadway, will continue to lead Roadway, which will be an operating unit under the Yellow-Roadway holding company. Zollars said Yellow-Roadway's combination would go slowly at first until officials of both companies get a closer look at how both companies operate internally. "Frankly, integrating the operations today doesn't make a lot of sense," Zollars said. "They are running very efficiently right now. You get into a diseconomy of scale at some point." Shippers were stunned by the biggest trucking news of the year. It occurred in the dog days of summer but served as giant hit of Jolt cola in a big wake-up call for corporate traffic managers and logisticians. "Whoa, man alive!," said Al Giunchi, corporate traffic manager of Hartz Mountain Corp., Secaucus, N.J., echoing many shippers' sentiments. "My biggest concern now is (rate) negotiations. Yellow just increased its business by 34 percent. Come negotiations time, it's either going to be a lively discussion or it's going to be all one-way. It's going to be like negotiating with IBM when it was the only game in town." Giunchi said shippers will have to be on the top of their game in rate negotiations in dealing with the new $6 billion gorilla on the LTL block. "I think it reduces shipper options," he said. "This company will have more than 50 percent of the long-haul market. That's a concern, having 50 to 60 percent of the long-haul market." In less than a year the Big Four LTL unionized carriers -- Roadway, Yellow, Consolidated Freightways and ABF Freight System -- have been reduced to two ownership entities. CF closed last Labor Day, taking nearly $2 billion in capacity off the market. At $1.3 billion, ABF now is the lesser half of what can be called the "Big Two" unionized carriers. After the new $6 billion Yellow-Roadway Corp., the next-largest LTL carriers are all nonunion. There's $2 billion FedEx Freight (the two-year-old combination of Viking Freight and American Freightways); $2 billion Con-Way Transportation Services (the perennial leader in LTL profitability with around $200 million operating profit annually) and $1.3 billion Overnite Transportation Co. Zollars said shippers might not notice much difference in the first days of the merger. Both companies are operating at about 90 percent capacity, Zollars said. "Capacity will take care of itself over time," Zollars said. "We're going to have a minimum of customer leakage."
|
|||||
