In truckload blockbuster acquisition, Heartland buys CFI for $525 million

In a move that catapults it into the top 10 largest truckload carriers in America, North Liberty, Iowa-based Heartland Express is buying Contract Freighters Inc.’s (CFI) non-dedicated U.S. dry van and temperature-controlled TL business and its CFI Logistica operations in Mexico from Montreal-based TFI International, Inc. for $525 million.

CFI’s dedicated and logistics U.S. brokerage operations are not included in the deal, one of the largest truckload acquisitions in the $332 billion full truckload market in this century.

With this transaction, Heartland becomes the eighth-largest truckload fleet and third largest irregular route, asset-based truckload carrier in the U.S. with annual revenue of approximately $1.3 billion.

The deal gives the combined companies approximately 5,550 tractors (including approximately 250 independent contractors). The combined fleet has an average age of approximately 2 years and approximately 17,800 trailers with an average age of approximately 5.6 years. The equipment is substantially all owned, Heartland said.

Prior to this acquisition, Heartland was the 24^th-largest TL brand with $645 billion revenue last year. The U.S. revenue of CFI was $856 billion, according to figures compiled by SJ Consulting.

This will be Heartland Express’ largest acquisition. By adding CFI’s storied brand, talented team, and cross-border expertise, Heartland will allow CFI to continue under its existing brand, management and terminal locations.

CFI was founded in 1951 as Contract Freighters Inc. in Joplin, Mo. In the past 15 years, it has gone through several owners, and at least three different names. In 2007 it was purchased by Con-way and became Con-way Truckload. Then in 2015, XPO bought Con-way. Canadian-based TFI, then named Transforce, bought it from XPO in 2016 as part of a strategy to expand further into the U.S. and brought back the CFI name.

Heartland Express will have estimated annual operating cash flow of approximately $260 million, as well as $2 billion in estimated pro forma total assets.

Heartland’s internal operating plan anticipates a consolidated adjusted operating ratio of 85% or better within three years and repayment of all indebtedness within four years after closing the acquisition.

Excluding certain transaction costs, Heartland said the transaction is expected to be immediately accretive to earnings. Transaction value is anticipated to be funded with existing cash and borrowing under new $550 million revolving and term loan agreements, Heartland said. 

“We are thrilled to welcome CFI to the Heartland Express family of companies, where it will continue to operate from Joplin under its own brand and current leadership team,” Michael Gerdin, chairman, president and CEO of Heartland Express, said in a statement.

“CFI has exactly what we look for as we expand – significant scale, a respected and recognizable brand, capable management, safe and experienced drivers, a strong asset base and a complementary terminal network,” Gerdin added.

Gerdin said CFI’s strengths in the north-south midwestern corridor will add to its driver and customer capability. The acquisition also helps Heartland’s north-south endeavors, as CFI is a major player in and out of Mexico.

“Their cross-border expertise will help us capitalize on the expected long-term freight volume benefits of nearshoring activity by manufacturers,” Gerdin added. “At the same time, we can offer the CFI people a home that is entirely focused on their core – high-service, irregular route, asset-based truckload freight transportation.”

Alain Bédard, chairman, CEO and president of TFI, said the transaction is a true “win-win-win” for TFI, CFI and for Heartland Express.

“CFI is a great company, but the U.S. irregular route truckload business has become a small part of our portfolio,” Bedard explained.

Bedard noted that CFI’s people have been a “small part of big companies” for the past 15 years. “We wanted to find them a permanent home with a leader in the asset-based truckload industry to show what they can accomplish. Heartland Express is a truckload industry leader, and they respect and support CFI’s brand, leadership and drivers,” Bedard said.

“Mike Gerdin and I were able to quickly see the benefits to all parties and come to fair terms,” Bedard added. “We could not have found a better match culturally and financially for this transaction, which will afford CFI the opportunity to flourish and allow us to redeploy capital and focus our U.S. based efforts on LTL, asset-light logistics, and specialized truckload units. We expect a smooth path to closing and wish our colleagues at CFI and Heartland Express only the best.”

CFI was a pioneer in the cross-border Mexican logistics arena and remains one of the sector’s largest and most respected supply chain partners, with operations at five major entry points from California through Texas. CFI Logistica provides asset-light truckload and less-than-truckload services in Mexico, in particular serving as a distribution partner for several large U.S. LTL companies.

CFI owns its headquarters which covers approximately 200 acres in Joplin, along with strategically located facilities in Laredo, Texas; West Memphis, Ark.; Taylor, Miss.; Sanford, Fla.; and Nuevo Laredo, Tamaulipas, Mexico. These six locations will be acquired by Heartland and bring the total to 30 owned terminals across the U.S. and Mexico.

CFI has approximately 2,100 tractors and 8,000 dry van and temperature-controlled trailers. All tractors and trailers are owned except 93 tractors and 136 trailers. In addition, CFI contracts with approximately 250 independent contractors who provide their own tractors.

Heartland said the enterprise value of the transaction is $525 million calculated on a cash-free, debt-free basis and subject to certain adjustments. Under the purchase agreement, Heartland Express will acquire 100% of the equity of Transportation Resources, Inc., parent of Contract Freighters, Inc. and the Mexican entities comprising CFI Logistica.