News / Rival LTL players snap up Yellow terminals in $1.9bn auction

Speculation about a new entrant in the US less-than-truckload (LTL) market on the back of a massive facility investment proved unfounded – the sale of most of bankrupt Yellow’s terminals saw rival LTL players snap up most of the facilities.

Twenty-nine bidders, including real estate firms, committed almost $1.9bn for the 128 Yellow properties in the managed sale, which left another 46 locations for subsequent purchases.

XPO made the biggest move, forking out $870m for 28 properties, including two leased facilities; Estes is spending $248.7m for 24 terminals, Saia is acquiring 17 for $235.7m and US $51.3m on 13 facilities.

One notable absentee was LTL heavyweight Old Dominion Freight, which had briefly held a stalking horse bid of $1.5bn for the entire lot of Yellow properties in the pre-bidding process, before it was topped by Estes.

But Old Dominion may yet acquire Yellow facilities in the second round of selling, noted Satish Jindel, president of SJ Consulting. Presumably the 46 remaining facilities did not attract bids that met the threshold set by the bankruptcy court, which supervised the auction.

Old Dominion has invested in property over the years, and has facilities that are approaching capacity, said Mr Jindel.

Meanwhile, the outcome of the sale essentially entrenches the LTL status quo, ending speculation of a new entrant into the market, he added.

“This reinforces that the LTL industry is protected from some crazy disruption, and that it should continue to generate good returns for investors – it takes more than terminals to create an LTL carrier”.

For the most part, their acquisitions will allow incumbent LTL players to expand their footprint, boost capacity in some locations and fill some holes in their network, he said.

XPO’s outsize acquisition does not augur a significant change in the landscape, according to Mr Jindel. Some of the properties it is taking on will replace older, smaller facilities or replace terminals XPO is leasing, he said.

Mr Jindel suggested some of the unsold sites may struggle to find takers, as they may not be attractive to LTL operators. He pointed to Yellow’s large facilities in Chicago and Maybrook, New York. The former occupies 103 acres and has 426 doors and the latter has 304 doors, which may appeal to real estate firms for turning into industrial parks.

With more properties to be sold, and the sale of Yellow’s 12,000 tractors and 35,000 trailers still to come, the proceeds should easily exceed the liabilities on the table: $1.2bn of debt and $200m in bankruptcy financing, said Mr Jindel.

“The secured creditors have nothing to worry about,” he said. “This shows the company is more valuable dead than alive.”

And he doesn’t expect to see an impact on the market from the sale of the Yellow equipment.

“This is not going to flood the market. A lot of Yellow’s trailers are very old,” he said.