P.A.M. Transportation has made its first purchase in nearly 20 years.
The truckload carrier announced the acquisition of Metropolitan Trucking Inc., based in the New York area, on Wednesday for a total consideration of $77.4 million.
Metropolitan also transports truckloads. Prior to this, the most recent P.A.M. acquisition was McNeill Trucking in 2003.
P.A.M. (NASDAQ: PTSI) said in a prepared statement announcing the acquisition that Metropolitan had $83.3 million in sales for the fiscal year ended March 31, $75.4 million net of fuel. EBITDA was $22.1 million, and operating income was $13.5 million.
P.A.M., situated in Arkansas, had revenue net of fuel of $641.3 million and an operating income of little over $100 million in the previous year.
“As we looked to make our first purchase in a long time, Metropolitan ticked all the boxes on what we were looking for in a company,” P.A.M. CEO Joe Vittirito said in a statement. “We want to operate it as a distinct entity, allowing the experienced management team, drivers, and workers to continue to provide the same high level of service and attention that their clients have come to expect.”
Vitiritto stated many reasons for the transaction in an email to FreightWaves.
“We felt the acquisition would be complementary to P.A.M. because of their drivers, culture, geographic reach, customers, and experienced office team,” he said. “These factors also allow us to conduct the firm independently of P.A.M. while benefiting from economies of scale.”
He also stated that the age of Metropolitan’s fleet was about comparable to that of P.A.M., which was especially advantageous considering what Vitiritto called a “difficult” equipment market.
Metropolitan, according to Vitiritto, has been in business for more than 90 years. It has about 320 vehicles and 1060 trailers. The former has an average age of 2.1 years, whereas the latter has an average age of 6.1 years.
When asked if the Metropolitan transaction removes P.A.M. off the M&A market, for the time being, Vitiritto stated that the business “will continue to seek for quality acquisition prospects moving forward, and it will be one aspect of our overall growth plan in the immediate and long term.”
“Valuations for well-run asset-based truckload companies like Metro have been and will continue to be reasonable,” he noted.
According to the P.A.M. release, the $77.4 million deal is comprised of approximately $15.5 million in assumed debt and $64.3 million paid out “using available cash balances.” P.A.M. had $77.9 million in cash on its balance sheet at the end of the first quarter.
Metropolitan operates in three states: New Jersey, Pennsylvania, and Illinois. Its principal service region is described as the eastern United States. Metropolitan CEO Joe Mangino stated in a prepared statement for P.A.M. that Metropolitan will be “the Northeast regional face for P.A.M.” We are proud to maintain our ancient culture and identity.”
P.A.M. stated that the transaction is projected to be immediately accretive, excluding purchase costs. The agreement has no earn-out targets or payouts, according to P.A.M.
It also stated that Metropolitan’s assets have resulted in “real cash savings” of $14.4 million in taxes this year.
The stock of P.A.M. increased dramatically as a result of the announcement. By 3 p.m. Eastern, it had increased $1.84 to $29.52, a 6.65 percent gain. P.A.M. has been one of the hottest trucking stocks over the last year, increasing more than 90% in 52 weeks. However, it has suffered recently, falling 16.94 percent in the last three months, according to BarChart.
