SCS Transportation has announced its divesture of Jevic Transportation, a hybrid LTL/truckload carrier, to an affiliate of Sun Capital Partners for $40 million in cash. The transaction marks a deeply discounted sell-off of a carrier that was once a bellwether of trucking innovation and a Wall Street darling.
“Jevic, which has not achieved acceptable levels of profitability for several years, is not core to the long-term direction of [SCS],” said Bert Trucksess, SCS chairman & CEO. “[SCS] will now be comprised solely of Saia Motor Freight Line, Inc., our leading multi-regional LTL carrier.”
“In the past, our team has been passionately focused on our business as part of a very fine larger corporation,” stated Dave Gorman, Jevic president & CEO. “We believe that by operating as a stand-alone company, together with the world-class operating and financial expertise of Sun Capital Partners, Inc., we will be well-positioned to capitalize fully on a wide range of new growth opportunities.”
SCS intends to reinvest the proceeds in its profitable Saia operation, which posted a five-year compounded growth rate of 16% for revenue and 30% for operating income. SCS aims to expand the geographic footprint of SCS either through acquisitions or organic growth, Trucksess said.
Jevic Transportation was founded in 1981 by Harry Muhlschlegel, who developed a unique operating model that forgoes the conventional “hub-and-spoke” model of traditional LTL by pre-planning loads that require a similar route to eliminate the need for a vast terminal network. This presented a more direct model and Jevic became “a regional and inter-regional LTL and truckload carrier that combines the high-yield revenue characteristics of LTL carriers with the operating flexibility and low fixed costs of truckload carriers,” stated Yellow Corp. (now known as YRC Worldwide) after purchasing the company.
Jevic was sold to Yellow on July 1999 for about $200 million. Apparently the agreement did not require Muhlschlegel to sign a noncompete clause. On July 2000, Muhlschlegel founded New Century Transportation in Westampton, NJ, just miles away from Jevic’s Delanco, NJ-based headquarters. On March 2002 Yellow announced that it would spin off SCS Transportation, which was the holding company for Yellow’s regional operating companies, Saia and Jevic.
Last year privately held New Century Transportation netted $141 million in revenues and is growing, a spokesman for the carrier said. The company operated only one terminal at its headquarters before opening an additional one in April 2005 at Duncan, SC.
“[Muhlschlegel] started another company with the same business model to compete with Jevic and took that business away from it,” Satish Jindel, president of S.J. Consulting told FleetOwner. “[Jevic is] competing with a guy that knew as much or more about the business as Jevic did. It was a business model that served a niche market to begin with.”
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