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Jun 03, 2024

Logistics Operators Are Looking to Break the Sector’s IPO Logjam

Bankers say tight financial markets and weak freight demand has led to a drought in new public listings among transport and logistics companies

Wall Street Journal
By Paul Berger
3 June 2024

Transport and logistics operators are looking to break a logjam in public stock offerings, with bankers saying some companies are exploring listings following a fallow period marked by tight funding and weak freight demand.

"This year we've seen more IPO pitches in the transport space than the last few years combined," said Dan Howard, a managing director and head of North America transport at Goldman Sachs.

Bankers and logistics executives say the IPO pipeline is being primed by companies owned by founders, families and private-equity firms that put sale and public listing plans on pause in recent years because of the roller coaster freight cycle.

They say buyers weren't willing to pay a multiple on revenues that were inflated during the Covid pandemic, when logistics-sector earnings soared because of strong freight demand.

Owners more recently have been reluctant to sell because freight volumes and earnings have been in decline, deflating company valuations.

Refrigerated warehousing company Lineage Logistics, which along with rival Americold Realty Trust is the one of the largest cold storage operators in North America in terms of capacity, is the biggest on the docket. Lineage could target a valuation of $30 billion or more in an IPO led by Morgan Stanley and Goldman Sachs later this year, according to people familiar with the process. At that valuation, the deal would make the Michigan-based company one of the biggest IPOs of the year.

Ohio-based tank truck transporter Kenan Advantage Group is exploring an IPO at a valuation of $3.5 billion, Bloomberg reported. A spokesman for Kenan's owners, Omers Private Equity, declined to comment.

Rachel Gerring, who advises on IPOs at consulting firm EY Americas, said there is pent-up demand, especially among private-equity-backed companies under pressure from investors to sell or list publicly.

"There is a pipeline of companies that potentially need to come to market," said Sanjay Arora, a partner at ATL Partners, a New York-based private-equity firm that specializes in transportation and logistics.

Logistics companies are exploring public listings amid a broader resurgence in IPOs following a slowdown in 2022 and 2023. This year has already seen a parade of traditional listings, including digital-rewards company Ibotta, social-media platform Reddit and AI-focused Astera Labs.

Two logistics companies have listed so far this year in relatively small listings. An IPO of car carrier Proficient Auto Logistics in April, which raised $215 million, was a roll-up of five trucking companies rather than a traditional public listing. Last month's IPO of California-based warehousing and logistics service Armlogi Holding was a minnow, raising just $8 million.

The broader IPO listings slowdown began after the Federal Reserve started raising interest rates in early 2022. It coincided with a steep downturn in the freight industry that scuttled some logistics companies' plans to go public.

New York-based digital freight broker Transfix in 2022 abandoned plans to list via a merger with a special-purpose acquisition company that aimed to raise up to $375 million.

SPAC IPOs lost favor with investors after companies that went public via mergers with the blank-check companies struggled.

Transfix's own business ran up against dimming freight demand and pricing in the U.S., but it was able to raise a smaller sum via a private funding round. A larger rival, Seattle-based Convoy, that toyed with a potential IPO after being valued at $3.8 billion in 2022, went out of business last year.

The U.S. logistics industry has been in the doldrums for about two years. Companies' hopes of a freight market rebound this year have faded as truckers and brokerages struggle amid weak rates.

Bankers and advisers say tech-focused logistics companies, such as freight forwarder Flexport, which last year said it was pushing back plans for public listing, don't make good IPO candidates in the current market, which is focused on companies that have a strong record and that can show profitability.

They say the best candidates are companies that have specializations that "have enabled them to outperform broader freight market trends," said Keith Prusek, global joint head of logistics and transportation investment banking at Jefferies.

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