A federal bankruptcy court has approved the sale of Allied Systems Holdings, once the nation’s largest auto hauler, to Jack Cooper Transport Co. for $135 million.
Cooper already is the nation’s largest auto hauler, but its pending acquisition of Allied means it will have a position of dominance not seen since Allied’s prime.
Cooper’s management said it expects growth in conjunction with expanding U.S. auto sales, which have grown continuously since mid-2011.
“We had unanimous support, and I think that was important to the judge. The Teamsters, the Canadian Auto Workers, customers and creditors — all were on record in support,” said Cooper Chairman Michael Riggs. “This was a very good event.”
Allied entered Chapter 11 bankruptcy reorganization in June 2012 for the second time in seven years. Judge Christopher Sontchi in Delaware signed the order of approval Sept. 17.
“The sales are the culmination of our efforts to strengthen the financial core of Allied Systems, and through them we have achieved our goal of maximizing the value of the company,” Allied CEO Mark Gendregske said.
The deal, which is all cash except for $10 million, still must be approved by the Justice Department. In addition to the Jack Cooper deal, a small batch of excluded assets — mainly real estate and personal property — will be sold separately.
Riggs said he would merge Allied Automotive Group, the company’s car-haul operations, into Jack Cooper. He said he anticipates 2014 revenue for the merged company of nearly $1 billion.
The company will have 70 to 75 terminals in the United States and Canada; 3,500 working car-haul rigs and another 500 spares; and 3,500 to 4,000 drivers. Allied and Cooper employees are represented by the Teamsters union.
Riggs said he will operate Allied’s Axis Group subsidiary as a stand-alone automotive transport logistics company.
“This is as good an outcome as we could have hoped for,” said Roy Gross, director of the Teamsters’ car-haul division. “Our members were almost collateral damage in the fight between the two groups of lenders. The judge acknowledged that this was ‘a very difficult case’ and that Allied was in danger of ‘dying on the vine.’ ”
In 2003 — two years before its first bankruptcy — Allied ranked No. 22 on the Transport Topics Top 100 list of for-hire carriers (it was named Allied Holdings then) and traded on the New York Stock Exchange. Its annual revenue from the previous year was $898.1 million, although it did have a net loss of $7.53 million. The next largest autohauler was United Road Services, with $248.7 million in revenue.
Allied’s history also includes a role in American Trucking Associations, with Guy Rutland Jr. serving as chairman in 1957-1958, and his son, Guy III, in 1987-1988.
Allied filed for Chapter 11 bankruptcy in August 2005 and was delisted by the American Stock Exchange later that month. In June 2007, it emerged from bankruptcy as Allied Systems Holdings and was owned by Yucaipa Cos.
In June 2012, Allied filed Chapter 11 again. SJ Consulting estimated Allied’s revenue at $305 million at the time, good enough for third place among car haulers behind Cooper, first with $500 million, and United Road Services in second place with $325 million.
The company did not report revenue and therefore is not ranked in the current TT Top 100.
Riggs, who bought Jack Cooper from its founding family in 2009, said he thinks size will be the key to the success for which he is hoping.
“It helps in minimizing empty miles, which can be 50% to 75% in this industry,” Riggs said. In contrast, truckload carriers usually try to keep empty miles, or deadhead, below 10%.
Riggs said the car-haul sector is beset with high deadhead because car-haul rigs can move only cars and pickup trucks. However, by adding terminals, he thinks it improves the odds of getting at least a partial backhaul.
“It’s a density strategy: The more terminals you have, the more you can build economies of scale,” he said.
Prior to the recession in 2007, U.S. auto sales were about 16 million a year, but by the fall of 2009, the annualized rate hit bottom at 9.36 million. This year, they are on pace to top 15 million.
Riggs said he thinks car sales will keep growing and hit 18 million vehicles a year within three or four years.