YRC Worldwide (Nasdeq: YRCW) announced late Friday that it has reached an agreement to sell most of the remaining operations of YRC Logistics to a private investment group for $37 million. As part of an reorganization aimed at avoiding bankruptcy, the country’s largest LTL carrier had sold off the logistics business’s dedicated contact carrier operation last November for $34 million. The only portion of that group still retained by YRC will be its domestic freight forwarding and China-based logistics operations , according to a spokesperson for the company.
“I think it is the right thing for the company to do,” said Satish Jindel, president of transportation research firm SJ Consulting. “Their LTL business is large and faces so many challenges. Management needs to focus on LTL.”
Austin Ventures, which is described as “a strategic private equity investor” with $3.9 billion under management, will operate the business as a private company offering international freight forwarding, customs brokerage, transportation management, truckload services and dedicated warehouse service in North America, Latin America, Europe and Asia, according to a press release.
YRC Worldwide will continue “to offer full global logistics solutions for our customers through a strong business relationship with the new company,” said Bill Zollars, YRC chairman, president and CEO, in the press releas. The logistic group’s current management team will also remain in place, according to the release.
With other competitors like Con-way and Estes Express adding transportation services, some might question YRC’s decision to sell off non-LTL operations, Jindel told Fleet Owner. “Are they wrong to broaden offerings?” he asked. “No, they’re right, but YRC is also right because they need to focus on their LTL challenges. I just wish they’d started earlier.”
The logistics group accounted for $411.7 million in revenue in 2009, or 8% of YRC Worldwide’s $5.3 billion in consolidated revenues. It had an operating loss of $4.5 million last year, showing a 33.8% decline in revenues from 2008, according to YRC’s annual report. Analysts estimate that the dedicated contract operation sold in Nov. accounted for $65 to $75 million of the logistic group’s revenue. YRC offered no estimate on revenues from the China and domestic freight forwarding operations.
YRC’s core national and regional LTL operations had combined revenues of $4.8 billion in 2009, a sharp drop from $8.3 billion in 2008. In addition to the sale of assets, the company reached an agreement to suspend pension payments to the International Brotherhood of Teamsters until the end of 2010 and completed a debt-for-equity exchange in Dec. as part of its reorganization efforts.
