Heartland Express (NASDAQ:HTLD) said Monday it will acquire the Contract Freighters non-dedicated U.S. dry van and temperature-controlled truckload business and CFI Logistica operations in Mexico from TFI International (TFII), for a cash enterprise value of $525M.
CFI does not include TFII's CFI Dedicated or CFI Logistics U.S. brokerage operations, which are not part of the deal.
HTLD estimates the $525M enterprise value approximates 5x run rate adj. EBITDA.
HTLD will acquire Transportation Resources, parent firm of Contract Freighters, and the Mexican entities comprising CFI Logistica.
The deal contains terms and conditions, including purchase price adjustments for net working capital and retention by TFII of liability for CFI's pre-closing auto and workers' compensation claims.
The deal, which will be HTLD's largest, is expected to be immediately accretive to EPS.
CFI will continue from Joplin under its existing brand, management and terminal locations.
The acquisition of CFI, along with the Smith Transport acquisition, will make HTLD the eight largest truckload fleet and third largest irregular route, asset-based truckload carrier in the U.S
The combined company will have estimated annual pro forma total revenue of ~$1.3B, estimated annual operating cash flow of ~$260M, and estimated pro forma total assets nearing $2B as of Jun. 30.
Operating plan anticipates consolidated adj. operating ratio of 85% or better within three years and repayment of all indebtedness within four years after closing.
The deal will be funded with existing cash and borrowing under new $550M revolving and term loan agreement to be entered into once the deal closes.
The credit deal - which will be unsecured and mature in five years - is expected to include a $100M revolving credit availability and up to $450M in term loans.
Immediately after closing, HTLD expects to have a net leverage ratio of ~1.25x and ~$160M of cash and available borrowing under the credit facility.
The deal is expected to close in Q3.