Proceeds from divestiture will fund future share repurchases
Transportation and logistics provider ArcBest announced the sale of FleetNet America after the market closed Tuesday. The unit, which provides emergency roadside and preventive maintenance services, was sold to Cox Automotive for $100 million.
The deal closed Tuesday with ArcBest (NASDAQ: ARCB) receiving a cash payment for the full amount, which is subject to taxes and customary adjustments. ArcBest expects net proceeds of $75 million from the deal and said it will book an after-tax gain of approximately $50 million.
“FleetNet has been a valuable part of ArcBest, giving us insight and expertise in equipment maintenance and repair,” said Judy McReynolds, ArcBest’s chairman, president and CEO. “As an integrated logistics company, it is no longer core to our growth strategy.”
In addition to ArcBest’s $3 billion asset-based trucking unit, which includes less-than-truckload services, it has built out an asset-light logistics offering with more than $2 billion in annual revenue (excluding FleetNet’s contribution).
Management has said in the past the long-term goal is to have an equal revenue mix between the asset-based and asset-light businesses.
A little more than a year ago, ArcBest acquired truckload broker MoLo Solutions, which was generating $600 million in annual revenue at the time.
The roots of FleetNet date back to 1953, when it operated as an internal unit of Carolina Freight Carriers Corp. ArcBest acquired the unit as part of its acquisition of WorldWay Corp. in 1995. The name was changed to FleetNet America in ’97.
FleetNet utilizes a network of third-party service providers to perform maintenance, repair and roadside services for commercial and private fleets in the U.S., Canada and Puerto Rico.
FleetNet generated $343.1 million in revenue last year with adjusted operating income of $5.9 million. Adjusted earnings before interest, taxes, depreciation and amortization of $7.7 million imply the deal was executed at 13x trailing 12 months’ adjusted EBITDA.
A separate filing with the Securities and Exchange Commission said ArcBest and FleetNet entered into a transition services agreement, wherein ArcBest will continue to provide FleetNet with support services on a transitional basis.
Nearly $300 million of FleetNet’s 2022 revenue came from external customers, with the remainder being recorded as intersegment revenue.
ArcBest also announced Tuesday the board raised its share repurchase authorization limit by $98.5 million to $125 million. It plans to use the proceeds from the sale of FleetNet to buy back stock.
The company repurchased $65 million in stock last year.
“The sale of FleetNet and our strong balance sheet puts us in a great position to accelerate our return of capital to ArcBest’s shareholders,” McReynolds said.
Stephens Inc. was ArcBest’s financial adviser on the transaction.