Hub Group announces acquisition of Choptank Transport

Oak Brook, Ill.-based freight transportation and logistics services provider Hub Group said this week it has acquired Preston, Md.-based Choptank Transport, a provider of non-asset refrigerated transportation services in a move geared towards increasing its presence in the refrigerated transportation market.

Hub Group officials said that the purchase price was $130 million and was funded by cash on hand, adding that Hub Group has granted contingent compensation to Choptank’s owners and senior management “to incentivize their retention and drive continued growth of the business.” And they added that, for 2021, Choptank is expected to generate more than $450 million in revenue.

Established in 2000, Hub Group noted that Choptank has one of the fastest growth rates in the market and has a 20,000-plus carrier market in North America, focusing chilled and frozen service offerings. And it added that by bringing Choptank into the fold, this acquisition boost Hub’s refrigerated transportation presence, while also providing a complementary offering to serve its shipper customers multimodal and logistics needs, too.

What’s more, Hub said that this deal meshes well with its fleet comprised of 450 refrigerated intermodal containers, adding it plans to buy another 550 refrigerated intermodal containers in 2022. And it also observed that bringing Choptank in will help Hub in reaching its goal of topping more than $6 billion in revenue by 2025. Hub also said that Choptank brings increased scale to Hub’s brokerage service line, with more than $1 billion in combined revenue through dry van, refrigerated, and LTL freight expected for this year.

“The acquisition is expected to result in numerous complementary cross-selling opportunities for both Hub’s and Choptank’s customer bases,” said Hub. “With this transaction, Hub’s non-asset business lines will contribute over 40% of total revenue.”

Choptank’s 400 employees will become Hub Group employees, Hub noted.

On a conference call yesterday, Hub Group President and CEO Phillip Yeager said that through this acquisition Hub is adding a scaled and culturally-aligned brokerage that expands its reach, adds new refrigerated capabilities, brings on a great management team, and a technology platform, which will help Hub to continue its growth.

“Choptank will be combined with Hub’s existing truck brokerage operation, as the two businesses complement each other very well, with limited customer and carrier overlap,” he said. “The combined brokerage will have more than $1 billion in annual revenue and have an attractive mix of dry van, refrigerated, and LTL offerings, as well as a balance across transactional and committed freight. Refrigerated over-the-road transportation is a new capability for Hub and will offer numerous cross-selling opportunities into Hub’s customer base.”

On the IT side, Yeager said Choptank has developed an impressive set of technology tools, combining off-the-shelf with enhancements that deliver value to customers, carrier, and employees, adding that Hub intends to leverage Choptank’s technology platform within its own business.

“Our team is excited to join Hub Group,” said Choptank CEO Geoff Turner in a statement. “We share similar values of service, integrity and innovation, which we are excited to bring together to fuel our continued growth. Choptank brings our wealth of industry experience, a strong carrier network, and innovative technology that, when combined with the industry presence and reputation of Hub Group, will unlock value for our customers and move our business forward.”

Cowen analyst Jason Seidl wrote in a research note that while cross-selling will likely take some time to play out, his firm is encouraged at the limited customer overlap and it is complimentary to Hub’s growth in the brokerage segment, which will now contribute over 40% of total revenue next year.

“This acquisition also offers opportunities for Hub to more efficiently balance its refrigerated container operations,” he wrote.

Ben Gordon, Managing Partner of Cambridge Capital, an investor in niche supply chain leaders and also Managing Partner of BGSA Holdings, a leading mergers and acquisitions advisory firm focused on the transportation, logistics, and supply chain technology sector, told LM that Hub Group has built a market leader in intermodal logistics, at a time when customers are seeking holistic solutions.

“This is why major supply chain companies like Hub are pursuing acquisitions to expand their scope of services,” he said. “Choptank gives them strength in truck brokerage, capabilities in cold chain, and a deeper management bench for what will soon be a $3 billion business.”