Intermodal shipping: Hub Group subsidiary acquires Challenge Transportation

Freight transportation and logistics services provider Hub Group Inc. said this week that its Comtrak Logistics Inc. subsidiary, which offers national drayage and truckload services, has acquired certain assets of Newark, New Jersey-based intermodal drayage carrier Challenge Transportation.

Financial terms of the deal were not disclosed.

This marks the third acquisition Hub and its Comtrak subsidiary has made in the last 12 months as part of the company’s initiative of growing Hub’s North American drayage network.

In June, Comtrak acquired Domestic Transport Inc., a Pacific, Washington-based provider of intermodal drayage services.   And in early April the Hub Group acquired asset-light transportation company Exel Transportation Services (ETS), a subsidiary of Deutsche Post World Net, for $83 million. Exel Transportation Services was renamed at Mode Transportation.

With Challenge in the fold, Hub now has 26 full service terminals in its Comtrak network. Challenge has a 41-driver operation, handling container deliveries throughout the Northeast.

“We are focused on growing our drayage presence across the country and constantly evaluating acquisition opportunities,” a Hub official told LM. “We’ve known and worked with the company for a while now and were happy to reach this agreement with them. With the addition of this new terminal, we now have a strong base to start growing our presence in New Jersey, Connecticut, and the Greater New York City area.”

The official added that a Challenge has a roster of customers that nicely compliments Hub’s expertise.

Stifel Nicolaus analyst John Larkin wrote in a research note that his firm considers the acquisition of Challenge Transportation to be consistent with Hub Group’s objective of growing the percentage of its drayage that is provided internally.

Hub Group’s Comtrak segment handled about 57 percent of the company’s intermodal drayage as of late October and management has stated that its objective was to perform at least 60 percent of its drayage internally by the end of 2011, Larkin wrote.

“We believe the company’s expansion of its internal drayage services provide Hub Group with greater control of its intermodal service levels which is a major driver of the intermodal value proposition,” said Larkin.