The energy bust has touched off a wave of consolidation among the trucking companies that haul equipment around the oil patch, where business is shrinking along with the tumbling price of crude.
This week, Daseke Inc. said it would buy Hornady Transportation LLC, its second acquisition in just over a month. After the deal is completed, Daseke’s fleet will total over 3,000 tractors and 6,000 trailers, an increase in the tractor count of about 40% since last fall and a 50% addition in trailers.
Flatbed truckers have fallen on hard times after several years of rapid expansion driven by the shale oil boom. With oil prices careening toward six-year lows, producers have been cutting back on drilling, reducing the need for heavy equipment.
Loads carried on flatbed trucks grew by 4.7% in the second quarter from a year earlier, compared with 10% increases in 2013 and 2014, according to FTR Transport Intelligence. Freight rates inched up 2% last quarter, compared with an average 8.25% in all of 2014, according to the American Trucking Associations.
The flatbed business has few large operators, with many companies owning just a few trucks. These smaller firms have been hit particularly hard by the slowdown in revenue from energy customers, as well as patchy demand from other sectors, including industrial equipment and home-building, analysts say. That is creating opportunities for the largest flatbed fleets to get even bigger, a trend seen across the logistics and transportation sectors.
“There are just so many small players in the flatbed world,” said Jonathan Starks, an analyst with researcher FTR. “Generally overall in the trucking industry you’re going to see more mergers occurring…but we’re still at very early stages of that.”
Publicly traded Landstar said in June it had increased its fleet capacity by 717 trucks, or more than 8%, in the second quarter, mainly by adding more owner-operators.
Daseke didn’t disclose the terms of its acquisition of Hornady, which was founded in 1925 and runs a fleet of 230 tractors and 325 trailers out of Birmingham, Ala. Both companies are privately held, though Bloomberg reported last month that the company is planning an initial public offering.
The deal comes on the heels of Daseke’s acquisition last month of Bulldog Hiway Express, a South Carolina truck operator that specializes in so-called heavy haul loads, which includes large industrial equipment like wind turbines. Daseke also bought Lone Star Transportation LLC in October. The company projects revenues will hit $750 million this year, from $50 million in 2011.
“The flatbed and open-deck trucking industry is extremely fragmented and ripe for consolidation,” said Scott Wheeler, Daseke’s chief financial officer. “The vast majority of people doing this have less than 10 tractors. They’re largely regionalized and localized and focused on a particular type of freight…We’ve been able to take an industry that’s largely fragmented and regionalized and provide national scale to it,” he added.