TD's Take on Mullen Acquiring QuadExpress Event
Mullen announced that it has closed the acquisition of a non-asset based third party
logistics (3PL) provider.
Impact: POSITIVE
Details: Mullen announced that it has acquired QuadExpress, a division of Quad/
Graphics, Inc. (QUAD-US, not covered) for US$40 million, a U.S.-based, non-asset
based 3PL service provider focused on freight brokerage services using multiple
modes of transportation, with 1,700+ North American customers, utilizing 6,000+
transportation companies. As part of the transaction, Quad/Graphics will continue
to use QuadExpress' 3PL services over a 24-month period and the QuadExpress
management team will remain with the company.
TD View: This acquisition is significant for Mullen as it is the company's first
transaction outside of the Canadian market. In recent quarters, management has
warmed to the idea of U.S.-focused growth, but has remained cautious, noting that
it had not yet found the right fit on the Q1/21 conference call. In our view, this
transaction checks several boxes for Mullen. First, we note that the transaction
is consistent with the company's continued investments in technology. Second, it
is a unique and low capital entry into the hyper-competitive U.S. trucking market.
Finally, from a valuation perspective, Mullen discloses consideration of US$40.0
million, 2020 revenues of US$135.0 million and operating margins consistent with
the North American 3PL sector. To this end, we note that XPO Logistics (XPO-US,
not covered), a large, public 3PL provider had 2020 EBITDAS margins of 8.5%.
Assuming a similar margin would imply 2020 EBITDAS of ~US$11.5 million and
a transaction multiple of ~3.5x. While we expect that the transaction is accretive,
the larger takeaway, in our view, is the strategic nature of the transaction and the
implications for Mullen going forward.
Mullen Incredibly Acquisitive in 2021: Mullen continues its 2021 acquisition streak,
having now completed the acquisitions of APPS (full report), Bandstra Group (full
report), International Warehousing & Distribution (full report), Tri Point (full report),
and now QuadExpress.
Conference Call: We will updated our estimates following management's
conference call at 11:00am ET, dial 1-800-319-4610