Automobile hauler Jack Cooper Transport was named the winning bidder to buy its bankrupt rival, Allied System Holdings, following an auction in Delaware Bankruptcy Court last week, Mike Riggs, chairman of Cooper, told Transport Topics on Sept. 12.
A judge is scheduled to formalize the ruling Sept. 17 as part of Allied’s Chapter 11 proceedings. The companies are two of the top three auto haulers in the United States.
“I’m happy to report we had unanimous support by all the committees,” Riggs told TT following a two-day auction sanctioned by the court.
If approved, the deal “will probably take Jack Cooper Transport to $1 billion in revenue in 2014,” Riggs told TT. “It’s a huge event and will give us about 4,000 [total] trucks and trailers.”
He said Cooper’s $135 million bid was approved by committees representing Allied, its creditors and the Teamsters union.
The Teamsters union — which has about 1,000 members at Allied — said it would consider a strike if its existing contract at Allied was negated by new owners, including Allied creditors Black Diamond CLO and Spectrum Investment Partners LP, which also were expected to bid on the company.
Jack Cooper submitted “the best bid for the estate and the future of the company,” Roy Gross, director of the Teamsters’ car-haul division, said in a statement earlier this month.
Cooper ranks No. 53 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers and is the largest car hauler on the list, with more than 2,000 rigs and $500 million in annual revenue.
Allied has filed for bankruptcy twice, in 2005 and in June 2012. It is majority-owned by Yucaipa Cos. and is the third-largest motor vehicle carrier, behind Cooper and United Road Services.
During its first bankruptcy filing, Allied won a 15% wage cut from the Teamsters through 2010, when full wages were restored. In 2011, the Teamsters negotiated a contract through 2015 with the car haulers’ bargaining agent, the National Automobile Transporters Labor Division.
Performance Transportation Services, then the second-largest car hauler, shut down in 2008 following a strike by Teamsters members as the national recession was beginning.
Atlanta-based Allied had about 1,700 rigs and 2,100 trailers, according to August 2013 U.S. Department of Transportation data.
The pending sale comes against the backdrop of rising automobile sales after several years of stagnation. Car sales jumped 17% year-over-year in August to an annual rate of more than 16 million units, the highest level since the recession.
The U.S. big three automakers — General Motors Co., Ford Motor Co. and Chrysler Group — all reported double-digit volume increases for the month, WardsAuto.com reported.
“It’s a good time to be a car hauler,” said Bob Farrell, executive director of American Trucking Associations’ Automobile Carriers Conference.
“Capacity is tight, we’re still moving cars and there’s a movement afoot to increase capacity,” Farrell told TT. “Also, credit markets are not as tight as they used to be for carriers to place orders for new trucks and trailers.”
Black Diamond, Spectrum and Yucaipa were in litigation with Allied before its bankruptcy, Bloomberg News reported last week. Allied’s debt includes $244 million on a first-lien loan and $30 million on a second-lien obligation, Bloomberg reported. Yucaipa has $134.8 million of the senior debt and $20 million of the second-lien loan.
The loans have been in default since 2009, and Allied’s previous reorganization, which ended in 2007, gave creditors $265 million in first-lien debt plus $50 million on a second-lien obligation, Bloomberg reported.