Roadrunner breakup; refocus moves forward

The company expects the move to create shareholder value as each segment will be better suited to take advantage of “growth opportunities” by establishing business models focused on “specific long-term strategies.” The deal is expected to simplify each segment’s ability to access capital markets and insurance. Corporate costs are also expected to be reduced by operating the segments independently.

The deal still needs approval from the company’s board and regulators.

“With the actions announced today, we are left with two companies positioned to deliver significant value for their customers and investors,” Executive Chairman Chris Jamroz.

Roadrunner delisted from the New York Stock Exchange (NYSE) in April, allowing it to reduce administrative expenses and the burden of ongoing filing requirements with the U.S. Securities and Exchange Commission (SEC). The stock still trades over-the-counter between two parties directly, but no longer on a formal exchange.

Further restructuring

The planned spinoff advances the corporate shakeup, which has included several moves to cut costs, thwart losses and improve its capital position. Recent divestitures have raised more than $300 million for Roadrunner, allowing it to reduce debt and lease obligations. The company ended 2019 with $272 million in debt and finance leases with $132 million in operating leases.

• Roadrunner unloads another unit, sells Stagecoach Cartage
• Roadrunner to sell Prime division to CHRW to help clean up balance sheet
• Roadrunner sells flatbed unit, another step in restructuring
• Roadrunner continues to restructure, sells intermodal unit to Universal Logistics
• Roadrunner downsizes dry van business, announces closures of five terminals, mass layoffs at five other locations

Roadrunner has struggled to integrate and market past acquisitions, which were focused on offering a blend of “asset-right transportation” and “asset-light logistics service.” The annual losses have been large of late – $341 million in 2019 and $166 million in 2018, which are inclusive of asset and acquisition write-downs from past deals. In 2019, Roadrunner reported large operating losses in its Ascent Transportation Management unit, LTL and TL divisions. Only its Active On-Demand brand posted a profit.

In mid-July, Roadrunner announced a “significant” expansion in its LTL division, adding three new service centers in Chicago, Philadelphia and Riverside, California to advance its core LTL offering.

Ascent Global Logistics will be headquartered in Belleville, Michigan, continuing to offer freight management, international freight forwarding and air and ground expedited transportation services. The company is seeking a new secured revolving credit facility. Current President of Ascent On-Demand and Ascent CFO Tom Stenglein will become president.

Frank Hurst, who has been President of Roadrunner Freight since 2017, will become President of Roadrunner Transportation Systems, Inc. 

Shares of RRTS are up more than 10% on the news.

Click for more FreightWaves articles by Todd Maiden.

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