Werner acquires regional carriers in $142M deal with ECM Transport Group

Management expects little attrition of customers or drivers as the fleet will continue to operate under the current ECM banner. Drivers will see no changes to daily operations as driver leaders and leadership remain in place and they will be able to continue to operate their current equipment.

The purchase price implies the deal was done at approximately 8x operating income and roughly 5x earnings before interest, taxes, depreciation and amortization (EBITDA).

In 2020, Werner reported consolidated revenue of $2.4 billion with an adjusted operating margin of 10.2%, which includes brokerage and logistics operations that carry significantly lower margins than Werner’s asset-based TL operations (12.8%).

“The addition of ECM’s skilled drivers, nondriver associates and terminal network strengthens our portfolio by adding short-haul expertise in a segment in which consumer demand and supply chain needs are growing,” said Derek Leathers, chairman, president and CEO.

Shortly after it was announced that Leathers would succeed founder CL Werner as chairman, the company’s longer-term capital deployment strategy began to include acquisitions as a potential means of growth. The company sold its freight forwarding segment earlier in the year, refocusing its efforts on its core TL, brokerage and logistics offerings.

Werner ended the first quarter slightly leveraged, carrying $92 million in net debt, or 0.2x net debt-to-last-12-months’ EBITDA.

The deal was financed with cash on hand, existing credit facilities and a new $100 million fixed-rate term loan, which matures in May 2024.

In a separate filing with the Securities and Exchange Commission, Werner announced it amended its existing credit agreement with BMO Harris Bank (NYSE: BMO), raising borrowing capacity to $300 million, which includes the new term loan in addition to the existing $200 million revolving credit facility. The new term loan bears an interest rate of 1.28%.

Werner’s debt leverage increases to 0.4x on a pro forma basis as of the end of the first quarter. The company said it remains committed to a long-term goal of net debt-to-EBITDA in the range of 0.5x to 1.0x.

The deal increases Werner’s fleet (previously 7,800 units) by roughly 6% and adds 500 drivers to the roster. ECM also bolsters Werner’s presence in Ohio and the Mid-Atlantic and Northeast regions of the country and provides it more exposure to the growing 200- to 300-mile length of haul market.

The ECM fleet will report financial results through Werner’s one-way segment, which is part of its Truckload Transportation Services unit.

Synergies are expected to occur “through combined management of fleet” but ECM’s founder and president, Ed Meier, as well as nondriving associates will remain in place. Earnings accretion could step higher in the future as ECM benefits from Werner’s buying power, which is expected to improve the economics around equipment replacement as well as fuel and parts buying.

“We are excited to join the Werner team and look forward to continued growth as we leverage our collective strengths to serve our existing and new customers at even higher levels,” stated Meier. “We are standing by our existing customers and will continue to provide them with excellent service.”

“Both companies believe deeply that our professional drivers are the backbone of our organizations,” Leathers added. “We look forward to welcoming the ECM team and working together to create additional value for our customers and shareholders.”

Click for more FreightWaves articles by Todd Maiden.

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