Earlier this week, Jacksonville, Fla.-based Class I railroad carrier CSX announced it inked a definitive agreement to acquire Tampa, Fla.-based Quality Carriers, the largest provider of bulk liquid chemicals truck transportation in North America.
Financial terms of the deal were not disclosed. CSX officials said that the transaction is expected to be made official in the third quarter and is subject to regulatory review and certain customary closing conditions.
Established in 2013, Quality Carriers runs and operated the most extensive bulk tank trucking fleet in North America, with a fleet comprised of 2,500 drivers and a network of more than 100 company-owned and affiliate terminals and facilities in key locations throughout the U.S., Canada and Mexico. It serves myriad leading North America-based chemical producers and shippers. CSX officials said that the transaction will create a unique multimodal chemicals transportation solution that will expand the reach of both CSX and Quality Carriers.
“The acquisition of Quality Carriers further demonstrates our commitment to the strategic growth of our business and deepening our relationships with customers,” said James M. Foote, president and chief executive officer of CSX, in a statement. “Our new partnership will provide chemical producers and shippers with a first-of-its-kind multimodal solution that capitalizes on the powerful synergies between Quality Carriers’ truck transportation fleet and our cost-advantaged rail network. We believe that this new capability will create meaningful long-term value for our company.”
A CSX spokesperson told LM that the acquisition of Quality Carriers is aligned with the company’s long-term strategy to accelerate growth by deepening its relationships with its customers and providing them with more comprehensive transportation services throughout their supply chains, adding that CSX had been evaluating this opportunity over a number of months.
“The acquisition benefits both organizations,” she said. “We’ll be able to offer the first integrated multimodal chemical transportation solution of its kind, leveraging the reach of truck with the cost-advantage of rail. We expect this to drive volume growth in one of our most important business segments as customers benefit from cost competitive, industry-leading rail service. The transaction will create a unique multimodal chemicals transportation solution that will expand the reach of both CSX and Quality Carriers.”
When asked about the competitive benefits, or advantages, of this deal from a CSX perspective, the CSX spokesperson explained that the Quality Carriers footprint overlaps well with CSX in the East with a strong presence in the Gulf and West Coast.
“The acquisition extends the reach of the CSX network, enabling access to new products, markets, and regions through unique, competitive multimodal solutions leveraging the reach of truck with the cost-advantage of rail for the benefit of non-CSX served shippers,” she noted.
CSX said that Quality Carriers’ management team, led by President Randy Strutz, will continue to lead the business as part of CSX.
“Quality Carriers is excited to become a new and integral part of CSX, which has unparalleled knowledge, experience and presence in the rail-based bulk chemicals transportation space,” Strutz said in a statement. “Together, we will be exceptionally positioned to provide our customers—many of which have existing relationships with both CSX and Quality Carriers—with a unique and seamless rail-to-highway offering. We look forward to partnering with CSX and to create a new level of efficiency for bulk chemicals transportation.”
Tony Hatch, principal of New York-based ABH Consultancy, observed in a research note that initially his first thought, regarding this deal pertained to bad “rail buys truck” deals like Union Pacific’s 1996 acquisition of LTL carrier Overnite Express.
“But this is more like the CN approach, in a “feed the (RR) beast” mode,” he wrote. “Of course, CSX CEO Jim Foote was the CMO at CN; in addition, this deal compliments CSX's strengths, particularly its Trans-Flo product. The devil's in the details of course (and terms were undisclosed), but this is pro-growth in spirit. We also note that this multimodal chemical push would dovetail nicely with any assets for sale in the space, such as in Louisiana.”