Updated at 6:49 p.m. on Thursday, July 5, 2018.
In its biggest acquisition in its 32-year history, Covenant Transportation Group, Inc. completed an $83 million purchase Thursday of Landair Holdings, Inc., the Greeneville, Tenn.-based parent company of Landair Transport, Inc. and Landair Logistics, Inc.
The purchase will add 430 trucks and 900 trailers to Covenant's fleet and add new warehousing and warehouse services for multiple shippers. By contrast, Covenant has 2,559 tractors and 7,134 trailers.
Covenant said Thursday it expects the purchase will boost earnings in the second half of 2018 by 4 to 8 cents per share and add from 16 cents to 20 cents per share to Covenant's 2019 profits.
As a result, the announcement Thursday of the Landair deal boosted shares of Covenant by nearly 6 percent, or $1.84 per share, in trading on the Nasdaq Exchange. Covenant shares are up by nearly 87 percent in the past 12 months — the biggest gains in the market of any publicly traded company in the Chattanooga region.
Landair was founded in 1981 by Scott Niswonger and Ed Sayler and, with its 12 distribution facilities covering approximately 1.8 million square feet of warehouse space, grew to $121 million in revenues last year. In 2017, Landair generated $60 million from dedicated truckload operations, $41 million related to managed freight services, and $20 million from one-way truckload operations.
"We pursued Landair because of their proven record of growth and profitability in the dedicated and 3PL (third party logistics) markets, their talented management team led by John Tweed, and the quality and integrity of their culture represented by their co-founder, Scott Niswonger," Covenant Transport CEO David Parker said in a statement. "Landair is a perfect fit with our strategy to grow in areas where we can get closer and more heavily integrated with customers. We believe the backing of Covenant Transport Group will provide additional resources to expand Landair's dedicated truckload operations to best meet the needs of its strong customer base, as well as improve profit margins through identified cost synergies."
John Tweed will continue to lead the Landair business as its president and Landair will maintain its Greeneville headquarters and corporate name.
"I am excited about this combination because it will give Landair and its customers access to, and the benefit of, the comprehensive resources of CTG," Tweed said. "Continued growth at the pace we are experiencing requires access to the resources and support of a strong partner like Covenent."
Covenant said Landair's employees and customers "should notice little change moving forward."
But cost reduction opportunities at Landair have been identified in equipment, fuel, workers' compensation and casualty insurance, over the road services, and other areas.
Niswonger said the completion of the merger "is the start of the next chapter in the Landair story.
"We are blessed to have identified a strategic buyer that was founded on faith-based principles and is committed to continued investment in our business and people," he said.
The $83 million purchase of Landair tops the $82 million acquisition that Covenant made in 2006 of Star Transportation, which was previously the company's biggest purchase.
The Chattanooga-based Covenant will assume about $15.5 million in debt with the Landair acquisition.
The purchase was funded by Covenant's cash on hand of $45.5 million accumulated from positive operating cash flows since the end of February 2018 and approximately $53 million of previously unencumbered used revenue equipment financing, Parker said.
Contact Dave Flessner at firstname.lastname@example.org