News / Hub Group prepares for reefer growth with Choptank acquisition

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US transport management giant Hub Group is making a determined move into the reefer cargo business.

It is taking over Choptank, a Maryland-based truck brokerage that specialises in reefer traffic, for $130m in cash, it was announced last week.

The company says it wants to develop its cold chain business, which it expects to more than double over the next eight years.

Hub Group’s management was drawn to Choptank by the prospect of building up lucrative reefer business, as well as developing cross-selling capabilities.

While the new owner can meet rising interest in reefer capabilities among its own clientele, the takeover will give Choptank customers access to managed transport opportunities in the Hub fold.

“Refrigerated over-the-road transport is a new capability for Hub and will offer numerous cross-selling opportunities into our customer base,” said group president and CEO Philip Yeager.

Hub Group has a small footprint in the reefer market so far, owning a fleet of 450 reefer containers. And alongside the announcement of the Choptank acquisition, it said it would add 550 more reefer units to its fleet.

According to a study published on Researchandmarkets.com this year, the global reefer market will grow from 3.16m teu to more than 7m by 2030, climbing at a compound annual rate of 8%.

Choptank, which was founded in 2000, uses a network of about 20,000 carriers, and last year posted revenues of $450m, on track to $470m in turnover this year, according to its new owner. Reefer traffic brings in about 70% of turnover.

In addition, the new owners intend to use Choptank’s traffic to fill empty capacity on backhauls from inland points.

The 400-strong workforce of Choptank, including its management team led by founder and CEO Geoff Turner, will be integrated into the Hub organisation and combined with the brokerage business.

“The combined brokerage will have more than $1bn in annual revenue and have an attractive mix of dry van, refrigerated and LTL offerings, as well as a balance across transactional and committed freight,” said Mr Yeager, adding that Hub intends to use Choptank’s technology platform.

Choptank’s revenue, which has grown at an average rate of 10%, will bring Hub Group closer to its declared goal of producing over $6bn in annual revenues by 2025. Last year, the group reported revenue of $3.5bn, of which $431m came from brokerage. More than half of its turnover is from intermodal business.

The Choptank acquisition is the latest in a string of M&A moves on the logistics scene in recent months, including the acquisition of Transplace by UberFreight and the takeover of Bansard International by Seko Logistics.

Transplace CEO Frank McGuigan recently said shippers were leaning towards using a single platform for surface transport capacity. A network of some 20,000 reefer carriers is an attractive prize for a transport management firm that wants to grow in the reefer market.