Echo Global Logistics Inc. plans to sell itself to private-equity firm Jordan Co. LP in an approximately $1.3 billion deal that would take private one of the largest freight brokers in a red-hot U.S. shipping market.
The agreement would value Chicago-based Echo at $48.25 a share, representing a roughly 54% premium over its closing price Thursday, the companies said Friday. The deal is expected to close in the fourth quarter and is subject to shareholder approval.
Echo and Jordan said the deal would provide Echo with additional financial resources and more flexibility to continue building its technology and data science platform. Freight brokerages have been investing billions to automate their businesses as digital startups jockey for a bigger share of the domestic transportation management sector.
The move comes as freight transportation companies are logging record earnings on tight shipping capacity and strong demand in the recovering U.S. economy.
Echo is the eighth biggest U.S. operator based on 2020 gross revenue in the middleman freight brokerage business of connecting shippers with truckers, according to research firm Armstrong & Associates Inc., behind market leader C.H. Robinson Worldwide Inc. and rivals including XPO Logistics Inc. and Hub Group Inc.
New York-based Jordan has backed other transportation companies including specialty logistics provider Odyssey Logistics & Technology Corp., and freight forwarder AIT Worldwide Logistics Inc., according to Jordan’s website.
The transaction follows Uber Technologies Inc.’s agreement in July to acquire Frisco, Texas-based Transplace in a $2.25 billion deal to merge the privately held logistics service provider with Uber’s Freight unit.
In June, freight brokers Worldwide Express LLC and GlobalTranz Enterprises LLC said they planned to merge in a deal expected to close in the third quarter that would vault the combined entity into the top 10 providers of domestic transportation management, according to Armstrong’s rankings.
“There’s been a lot of private-equity investment” in the sector because “these companies are asset-light and the returns on investment capital tend to be very good,” said Armstrong & Associates President Evan Armstrong. The firm forecasts the U.S. domestic transportation management market to grow to $132.4 billion in gross revenue in 2023, from $91.2 billion in 2020.
“With private-equity firms having a lot of dry powder in the current market, we believe more deals similar to this may play out in the market in the near future,” Jason Seidl, a transportation analyst with Cowen Inc., wrote in a Friday research note.
Echo reported $934.5 million in overall revenue in the second quarter ending June 30, a high for the company that was 81.6% greater than the pandemic-depressed level the year before. Net income rose to $18.4 million in the period from $1 million in the second quarter of 2020.
Echo has expanded in part through 21 acquisitions over several years, most of them what the company calls tuck-in deals involving small operators.
“We intend to keep growing and get even more aggressive with M&A,” Echo Chief Executive Doug Waggoner said in an interview.
Going private will help the company compete for larger deals to expand the company’s reach, he said. “The small tuck-ins don’t move the needle as much for us at our current size,” he said.
The deal makes sense “given Echo’s relative valuation discount…and rapid growth compared to its larger brokerage peers,” Jack Atkins, a transportation analyst with investment bank Stephens Inc., said in a Friday research note. “The company was simply too cheap given its performance.”
—Dave Sebastian and Paul Page contributed to this article.