Heartland Express Buys CFI's Truckload Operations

Heartland Express is buying Contract Freighters’ non-dedicated truckload business from TFI International in its largest acquisition ever, creating a giant in the irregular-route truckload space.

Together with its recent Smith Transport acquisition, Heartland will become the country’s eighth largest truckload fleet and third-largest irregular-route, asset-based truckload carrier, according to the announcement.

Heartland Express Inc., North Liberty, Iowa, announced Aug. 22 that it will acquire the Contract Freighters non-dedicated U.S. dry van and temperature-controlled truckload business and CFI Logistica operations in Mexico from TFI International Inc. for a cash enterprise value of $525 million. The deal does not include the CFI Dedicated or CFI Logistics U.S. brokerage operations.

“CFI has exactly what we look for as we expand – significant scale, a respected and recognizable brand, capable management, safe and experienced drivers, a strong asset base, and a complementary terminal network,” said Michael Gerdin, Heartland chairman, president, and CEO.

He explained that CFI’s strengths in the north-south midwestern corridor will add to Heartland’s driver and customer capability, and its cross-border expertise will help the carrier capitalize on the expected long-term freight volume benefits of nearshoring activity by manufacturers.

“At the same time, we can offer the CFI people a home that is entirely focused on their core – high-service, irregular route, asset-based truckload freight transportation,” Gerdin said. “Over time, we expect to gain meaningful synergies and operate our consolidated business on a larger scale at our historical margins.”

CFI will continue to operate under its existing brand, management, and terminal locations, remaining headquartered in Joplin, Missouri. The transaction is expected to close in the third quarter of 2022.

A Forever Home for CFI?

For the past 15 years, the company founded in 1951 as Contract Freighters Inc. has gone through several owners. In 2007 it was purchased by Con-way and became Con-way Truckload. Then in 2015, XPO bought Con-way. Canadian-based TFI, then named Transforce, bought the company from XPO in 2016 as part of its strategy to expand further into the U.S. and brought back the CFI name.

“CFI is a great company, but the U.S. irregular route truckload business has become a small part of our portfolio,” explained Alain Bédard, TFI chairman, CEO, and president. “CFI’s people have been a small part of big companies for the past 15 years, and we wanted to find them a permanent home with a leader in the asset-based truckload industry to show what they can accomplish.

“We could not have found a better match culturally and financially for this transaction, which will afford CFI the opportunity to flourish and allow us to redeploy capital and focus our U.S. based efforts on LTL, asset-light logistics, and specialized truckload units,” Bédard said.

Gerdin explained that Heartland’s first goal is to minimize changes experienced by drivers and customers.

“Next, we will work with CFI’s management to optimize the consolidated freight networks across Heartland Express, Millis Transfer (which it bought in 2019), Smith Transport, and CFI, as well as enhance driver recruiting and retention, realize purchasing economies, and reduce overhead per truck. We believe CFI’s drivers will benefit from our extensive owned terminal network, in which we have invested millions of dollars to improve our drivers’ experience. As with every acquisition, our plan is to capitalize on each other’s strengths and improve consolidated profitability. Our goal is for our consolidated adjusted operating ratio to be 85% or below within three years after the closing.” 

What CFI Brings to Heartland

CFI was a pioneer in the cross-border Mexican logistics arena and remains one of the sector’s largest supply chain partners, with operations at five major entry points from California through Texas. CFI Logistica provides asset-light truckload and less-than-truckload services in Mexico, in particular serving as a distribution partner for several large U.S. LTL companies.

CFI owns its headquarters, which covers approximately 200 acres in Joplin, along with strategically located facilities in Texas, Arkansas, Michigan, Florida, and Nuevo Laredo, Tamaulipas, Mexico. These six locations will be acquired by Heartland and bring the total to 30 owned terminals across the U.S. and Mexico.

CFI's fleet consists of approximately 2,100 tractors and 8,000 dry van and temperature-controlled trailers. All tractors and trailers are owned except 93 tractors and 136 trailers. In addition, CFI contracts with approximately 250 independent contractors who provide their own tractors.

The combined company will have:

• Estimated annual total revenue of approximately $1.3 billion and estimated annual operating cash flow of approximately $260.0 million, as well as estimated total assets nearing $2.0 billion as of June 30, 2022.
• Approximately 5,550 tractors (including approximately 250 independent contractors) with an average age of approximately 2.0 years and approximately 17,800 trailers with an average age of approximately 5.6 years, substantially all owned.
• 30 owned facilities, strategically located near almost every major population and freight center in the U.S., with significant opportunities to reduce leased facilities and improve the driver experience.
• Diversified freight basket with over 95% contracted capacity and no single customer expected to be greater than 8% of revenue.