P.A.M. buys Metropolitan for $77.4 million; 1st acquisition in 19 years

P.A.M. Transportation has made its first acquisition in almost 20 years.

The truckload carrier said Wednesday it had acquired Metropolitan Trucking Inc., based in the New York area, for total considerations of $77.4 million.

Metropolitan is also a truckload carrier. The most recent P.A.M. acquisition before this was McNeill Trucking in 2003. 

In a prepared statement announcing the acquisition, P.A.M. (NASDAQ: PTSI) said Metropolitan had $83.3 million in revenue for the 12 months ended March 31, $75.4 million net of fuel. Its earnings before interest, taxes, depreciation and amortization was $22.1 million, and operating income was $13.5 million.  

By contrast, Arkansas-based P.A.M. had 12 months’ revenue net of fuel of $641.3 million and operating income of just over $100 million. 

“As we looked to do our first acquisition in quite some time, Metropolitan checked all the boxes on what we were looking for in a company,” P.A.M. CEO Joe Vittirito said in the statement. “We plan to run it as a separate business, which will allow the experienced management team, drivers, and employees to continue to provide the same high level of service and attention that their customers have come to expect.”

In an email to FreightWaves, Vitiritto said there were several reasons for the acquisition. 

“Their drivers, culture, geographic reach, customers, and experienced office team were big reasons why we felt the acquisition would be complementary to P.A.M.,” he said. “These reasons also allow us to run the business separate from P.A.M. but be able to take advantage of economies of scale.”

He also said the age of Metropolitan’s fleet was roughly in line with that at P.A.M., which was particularly favorable given what Vitiritto described as a “tough” equipment market. 

Vitiritto said Metropolitan had been operating for more than 90 years. It has approximately 320 trucks and 1,060 trailers. The former have an average age of 2.1 years; the latter, 6.1 years. 

Asked if the Metropolitan deal takes P.A.M. out of the M&A market for now, Vitiritto said the company “will continue to look for quality acquisition opportunities going forward, and it will be one part of our overall growth strategy in the near and long term.”

“Valuations have been and will continue to be reasonable for well-run asset-based truckload companies like Metro,” he added.

The $77.4 million value of the deal consists of about $15.5 million in assumed debt and $64.3 million paid out “using available cash balances,” according to the P.A.M. announcement. At the end of the first quarter, P.A.M. held cash on its balance sheet of $77.9 million. 

Metropolitan has facilities in New Jersey, Pennsylvania and Illinois. It describes its primary service area as the eastern U.S. In P.A.M.’s prepared statement, Metropolitan CEO Joe Mangino said Metropolitan would be “the Northeast regional face for P.A.M. We’re proud to continue to operate with our historical culture and identity.”

P.A.M. said that the acquisition is expected to be immediately accretive, excluding costs related to the purchase. There are no earn-out targets or payments in the deal, P.A.M. added.

It also said there are “actual cash savings” of $14.4 million in taxes this year due to deductions related to Metropolitan’s assets. 

P.A.M. stock gained significantly on the news. At roughly 3 p.m. Eastern, it had risen $1.84 to $29.52, a gain of 6.65%. Over the past year, P.A.M. has been one of the hottest trucking stocks, rising more than 90% over 52 weeks. But like other stocks, it has struggled recently, dropping 16.94% in the past three months, according to BarChart. 

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Source: freightwaves - P.A.M. buys Metropolitan for $77.4 million; 1st acquisition in 19 years
Editor: John Kingston