Hub Group sells Mode Transportation subsidiary

Hub officials said this sale represents the byproduct of an exploration of strategic alternatives for Mode that was undertaken by the Hub Group Board of Directors, which they said is part of an ongoing review of alternatives for creating shareholder value that it announced in August.

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Freight transportation services provider  announced late last week it entered into a definitive agreement to sell , a subsidiary company, to an affiliate of global private investment firm, , for roughly $238.5 million.

Hub officials said this sale represents the byproduct of an exploration of strategic alternatives for Mode that was undertaken by the Hub Group Board of Directors, which they said is part of an ongoing review of alternatives for creating shareholder value that it announced in August. The sales figure, Hub said, is equivalent to 10x Mode’s adjusted EBITDA for the 12 months ended June 30, 2018. And it added that proceeds from this sale will go towards acquisitions of businesses in both new and existing service lines, with Hub saying it is focused on acquiring high quality businesses that will deepen its relationships with its customers, strengthen its platform for growth and create shareholder value.

"Mode has an excellent management team, with a strong, solid agent base and loyal customers,” said , in a statement. “While Mode has been very successful, there was a lack of strategic alignment with Hub's centralized business model.  The talented Mode team, combined with York's expertise and significant resources, positions Mode well for realizing the next chapter of its growth."

said that Mode is an exceptional agent-based transportation solutions provider differentiated by customer-specific expertise, offerings across all modes of freight transportation and leading edge technology and analytics. 

“We are excited about joining forces with York and the support they will provide as we execute our growth plan,” he said.  “We look forward to continuing to serve our agent, customer and carrier community." 

Hub Group acquired Dallas-based Mode in April 2011, when it acquired asset-light transportation company Exel Transportation Services (ETS), a subsidiary of Deutsche Post World Net, for $83 million.

Hub subsequently re-named Exel as Mode Transportation. Mode is a non-asset 3PL offering truckload, less-than-truckload, intermodal, ocean, rail, air, and managed transportation services. Its functions through a network of independent business owners that sell and operate the business throughout North America.

When Hub acquired Mode, CEO Yeager said that Mode’s services were very complimentary to Hub’s and would give Hub more scale. He also noted that it was exactly the kind of acquisition Hub had been patiently awaiting: a strong operating and sales organization that compliments Hub’s core competencies.

Evan Armstrong, president of supply chain consultancy Armstrong & Associates, call the selling off of Mode a "good move" by Hub.

"With Hub Highway’s and Unyson’s domestic transportation management businesses growing well and Hub’s market-leading intermodal offering, Mode had become an operational duplicate which was not needed strategically," he said. "It makes sense to sell it off to gain some 'dry powder' for more strategically aligned acquisitions. 

About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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