New Deals in Logistics with BGSA’s Ben Gordon

Logistics: The View from Palm Beach

Highlights from the BGSA Supply Chain Conference


Every January, we have the pleasure of hosting more than 200 CEOs and leaders of transportation, logistics, supply chain and technology companies at the Breakers in Palm Beach. The annual BGSA Supply Chain conference has become a great way to learn about the big trends and opportunities shaping the industry.

So what did we learn this year? I’ll post the highlights. You can also see additional details at the BGSA 2017 conference site.

In sum, we see three key themes in particular: the Trump Bump, the power of e-commerce, and consolidation.


The Trump Bump

First, let’s start with the data.

At BGSA, we track the BGSA Supply Chain Index, which is a basket of 67 companies across nine segments, including logistics, trucking, rail, supply chain technology, and all other related segments.

The BGSA Supply Chain Index grew 16% in 2016, compared with a symmetrical 16% drop last year.  The BGSA Supply Chain Index also outperformed the S&P 500, which increased by 11% this year.  All in all, it was a strong year for our sector.

Within that market basket, here are some key highlights from 2016:

  • Outperformers:
  • LTL, which increased by 46%, led by SAIA (up 98%)
  • Truckload, which increased by 36%, led by Swift Transportation (up 76%)
  • Energy transportation, which increased by 31%, led by Trimac (up 119%)

Underperformers included healthcare distribution, which dropped by 20%, led by McKesson (down 29%)

What explains this strong year for the supply chain sector?

The first factor is the Trump Bump.  Of the 16% gain in 2016, a whopping 10% came in the month of November.  The market expects a Trump Administration to be bullish for transportation and logistics.  This conclusion is based on several expectations, including (i) an increase in American manufacturing, (ii) the $1 trillion infrastructure spending announcement, and (iii) lower taxes.  The biggest beneficiaries have been trucking companies, whose operating leverage gives them the ability to benefit from a boost in demand.  Fellow conference attendees YRCW and ARCB, for instance, both spiked over 50% in the month of November alone.

The second factor is the alphabet soup of regulatory compliance.  The Electronic Logging Device (ELD) mandate, which is slated to take effect in December 2017, will require all carriers to implement electronic recording of drivers’ Record of Duty Status (RODS), to ensure compliance with Hours of Service (HOS).  Many small fleets and owner-operators lack this technology, and the market expects capacity to shrink.  As a result, pricing is starting to increase.

The third factor is improving fundamentals in transportation and logistics.  Across the board, Q4 2016 data reflects economic strengthening, and increases in both rates and volumes.  In dry van trucking, spot market rates increased 5% year-over-year.  In air freight, spot market rates increased 2%.  In ocean freight, inbound container volumes increased 9%.  Further, shipping rates have strengthened after the bankruptcy of Hanjin, with Transpacific Eastbound rates up 52%.

Going forward, we expect a strong 2017 for the industry as a whole.


The Power of e-Commerce

The second major theme driving change in the supply chain is e-commerce.  2017 may finally be the year in which logistics and e-commerce converge.  Technology-based solutions for the last mile in particular are rapidly evolving.

In 2016, both Amazon and Uber announced they were targeting logistics.  Uber declared an “Uber for Trucking” app, and made a $680 million acquisition of Otto to pursue self-driving trucks.  Amazon also signaled plans for a logistics app and may become its own global freight broker and compete directly for business.  More importantly, Amazon already spends over $15 billion on shipping, and has begun to build an Amazon logistics organization that could rival the Amazon Web Services (AWS) model.

Meanwhile, we are seeing a hothouse of innovation in tech-enabled logistics, including:

  • Drones – with commercial deliveries for Amazon, 7-Eleven, and Maersk already underway
  • Online freight booking – including disruptors like Freightos, 10-4, and uShip
  • eCommerce fulfillment – with $2 trillion of annual sales and 15% annual growth, eCommerce customers are driving demand for faster and faster fulfillment, leading to same-day and even same-hour logistics solutions from companies like Amazon Prime Now, UberRUSH, Grand Junction, Doorman, and Bringg

These innovations are only going to accelerate.  Logistics technology attracted over $5 billion of funding in 2016.  This includes deals like:

  • Chinese logistics: ZTO
  • Tracking technology: Macropoint
  • Distributed warehousing: Flexe
  • TMS: 3Gtms
  • Last-mile logistics: Bringg
  • Visibility: project44
  •  And more

These technological changes pose both threats and opportunities.  On the one hand, truck brokerage stocks like CHRW and ECHO dropped nearly 10% the week Uber and Amazon’s brokerage apps were disclosed.  On the other hand, smart supply chain companies are making investments to ensure they will be ahead of the curve.  For instance, the UPS Strategic Enterprise Fund has invested more than $400 million in disruptive technologies and businesses, ranging from drones to e-commerce fulfillment software.

We expect to see more transportation and logistics companies choose to make a portfolio of strategic investments in 2017.


Consolidation: The Party Continues

The third theme is consolidation.  Amidst all of these positive catalysts, we are continuing to witness record M&A activity across all industry sectors.

Global transportation and logistics M&A volume remained strong, with over $120 billion worth of deals.

Major deals in 2016 included several global giants:

  •  US airlines:  Virgin America Inc.’s $4.2 billion acquisition of Alaska Air Group Inc.
  • Australian ports: Investor Group’s acquisition of Port of Melbourne Corp for $7.3 billion
  • Chinese trucking: Dalian Dayang Trands’ acquisition of YTO Express for $8.8 billion
  • Italian logistics: Cassa Depositi’s $3.3 billion acquisition of Poste Italiane

Meanwhile, middle-market M&A continued to dominate in the US, with a flurry of deals such as Pilot-ATL, Calyx-TransForce, UPS-Marken, Sunteck-TTS, and others.

All of these plot lines will continue to develop over the course of this year.

In summary, we are grateful for the ability to see so many terrific people and companies in one place.

-Ben

Blackstone’s Investment in JDA

Jin Jiang International Holdings Co., Ltd

BG Strategic Advisors Announces that Jin Jiang International Has Completed the Acquisition of BGSA Client YRC Worldwide Inc.’s 50% Interest in JHJ International Transportation


West Palm Beach, FL – March 31, 2016 – BG Strategic Advisors (BGSA) is pleased to announce that Jin Jiang International Holdings Co., Ltd. (Jin Jiang International), through its subsidiary Balance Global Limited, has completed the acquisition of BGSA client YRC Worldwide Inc.’s (YRCW) 50% interest in JHJ International Transportation Co., Ltd., (JHJ). The purchase provides Jin Jiang International with 100% ownership of JHJ and completes YRCW’s strategy of divesting non-core international assets. The sale represents BGSA’s first sale of a mainland Chinese company.

In July 2011, YRCW management implemented strategies focused on increasing profitability in its North American less-than-truckload ground transportation business. In 2012, YRCW divested non-core assets including its full truckload business and a China based trucking company. The sale of YRCW’s equity stake in JHJ to Jin Jiang Investment represents the last remaining non-core international asset in this series of divestitures.

JHJ is a mainland China-based asset-light 3PL and freight forwarder providing services including international ocean and air freight forwarding, warehousing, truck brokerage, customs brokerage, supply chain management, quality control, and other asset-light 3PL services. The Company increasingly specializes in the higher-margin segments of forwarding and logistics, including the transport of oversized project cargo, integrated warehouse operations, individually engineered transportation and logistics solutions, and complete supply chain integration. JHJ has over 1,200 employees and 77 client service locations in major Chinese cities such as Shanghai, Beijing, and Wuhan.

About YRCW

YRCW, headquartered in Overland Park, Kansas, is the holding company for a portfolio of less-than-truckload (LTL) companies including YRC Freight, YRC Reimer, Holland, Reddaway, and New Penn. Collectively, YRCW companies have one of the largest, most comprehensive LTL networks in North America with local, regional, national and international capabilities. Through their teams of experienced service professionals, YRCW companies offer industry-leading expertise in flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence. YRCW is listed on the NASDAQ under the ticker YRCW.

About Jin Jiang International

Jin Jiang International is one of the leading travel and hospitality conglomerates in China, with revenue and assets of approximately USD 9 billion and 6 billion, respectively.

Jin Jiang International has three core businesses: hotel management and investment, tourist services, and transport and logistics. It holds directly/indirectly four listed corporations: Jin Jiang Hotels (2006 HK), Jin Jiang Development (A share 600754, B share 900934), Jin Jiang Investment (A share 600650, B share 900914) and Jin Jiang Travel (B share 900929).

Jin Jiang International has extensive business and equity partnership with prestigious hotel groups such as Marriott, Hilton, InterContinental, Fairmont Raffels, Accor as well as over two dozens of globally renowned corporations such as Japanese Mitsui, JTB, UK HRG, and Swiss Les Roches Hotel Management College.

Ability Computer & Software Industries Ltd.

New York, NY and Tel Aviv, Israel – December 23, 2015 – Cambridge Capital Acquisition Corporation (NASDAQ: CAMB; CAMBW; CAMBU) (“Cambridge”) today announced the closing of its business combination with privately-held Ability Computer & Software Industries Ltd. (“Ability”) following the receipt of stockholder approval at Cambridge’s special meeting of stockholders held today in New York City.

As part of the business combination, Cambridge merged with and into Cambridge Holdco Corp., Cambridge’s wholly-owned subsidiary, and changed its name to “Ability Inc.”

Cambridge anticipates that effective with the commencement of trading on or about December 24, 2015, Ability’s ordinary shares and warrants will begin trading on the NASDAQ Capital Market under the new symbols ABIL and ABILW, respectively. Cambridge’s units will no longer trade.

At the special meeting, holders of 2,136,751 shares of Cambridge’s outstanding common stock issued in its initial public offering exercised their rights to convert those shares to cash at a conversion price of approximately $10.10 per share, or an aggregate of approximately $21.6 million, leaving approximately $59.7 million in trust for acquisitions, general corporate purposes and working capital, to pay the cash merger consideration to Ability’s shareholders, and to pay fees and expenses incurred by the parties.

Complete details regarding the transaction and the post-closing capital structure of the combined company will be set forth in a Current Report on Form 8-K, which will be filed with the Securities and Exchange Commission on or prior to December 30, 2015.

Benjamin Gordon, Chief Executive Officer of Cambridge, commented, “We are pleased to have completed this business combination with Ability, and appreciate the support of Cambridge’s stockholders. Homeland security agencies, government entities and armed forces across the globe have come to rely on Ability’s innovative, end-to-end tactical communications intelligence solutions. We believe that Ability has a bright future as it continues to penetrate the large and growing lawful interception sector, while expanding into new commercial markets.”

Anatoly Hurgin, Chief Executive Officer of Ability, stated, “This transaction elevates Ability’s profile as a NASDAQ-listed company and provides us with new capital and a public currency to facilitate our growth strategy. We expect to create long-term value for our shareholders through a number of growth initiatives.”

EarlyBirdCapital, Inc. (EBC), FBR Capital Markets & Co. and I-Bankers Securities, Inc. acted as financial advisors to Cambridge, and Migdal Underwriting & Business Initiatives Ltd. acted as financial advisor to Ability. Graubard Miller and Zemah Schneider & Partners acted as legal advisors to Cambridge, and Blank Rome LLP and Vibeke Dank, Adv. acted as legal advisors to Ability.

About Ability

Headquartered in Tel Aviv, Israel, Ability was founded in 1994 and is a provider of innovative tactical communications intelligence solutions used by government agencies, military forces, law enforcement and homeland security agencies worldwide, with an installed base in more than 50 countries. Ability offers a broad range of lawful interception, surveillance, decryption, cyber and geolocation solutions, with a strong focus on active and passive off-air interception and decryption of communications on GSM, CDMA, UMTS and LTE cellular systems as well as Iridium, Thuraya, and other satellite networks. State-of-the-art technology underpins Ability’s scalable offerings, which can be tactical-and-portable, or strategic-and-fixed, depending on its customers’ needs. Additional information regarding Ability may be found at http://www.interceptors.com.

Forward Looking Statements

This press release includes certain forward-looking statements, including statements regarding future financial performance, future growth and future acquisitions. These statements are based on Ability’s managements’ current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive and/or regulatory factors, and other risks and uncertainties affecting the operation of Ability’s business. These risks, uncertainties and contingencies include: (1) the outcome of any legal proceedings against Ability; (2) the ability to recognize the anticipated benefits of the business combination, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitably, maintain relationships with suppliers and obtain adequate supply of products and retain its key employees; (3) changes in applicable laws or regulations; (4) the possibility that the combined company may be adversely affected by other economic, business, and/or competitive factors; and (5) other risks and uncertainties indicated from time to time in Ability’s filings with the Securities and Exchange Commission. The information set forth herein should be read in light of such risks. Ability is not under any obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.

### #### ###

Contacts: The Equity Group Inc. Kalle Ahl, CFA 212-836-9614 kahl@equityny.com.

Jin Jiang International Has Agreed to Acquire Interest in JHJ International Transportation

West Palm Beach, FL – November 2, 2015 – BG Strategic Advisors (BGSA) is pleased to announce that Jin Jiang International Holdings Co., Ltd. (Jin Jiang International), through its subsidiary Balance Global Limited, has agreed to acquire BGSA client YRC Worldwide, Inc.’s (YRCW) 50% interest in JHJ International Transportation Co., Ltd., (JHJ). The purchase provides Jin Jiang International with 100% ownership of JHJ and completes YRCW’s strategy of divesting non-core international assets. The sale represents BGSA’s first sale of a mainland Chinese company.

In July 2011, YRCW management implemented strategies focused on increasing profitability in its North American less-than-truckload ground transportation business. In 2012, YRCW divested non-core assets including its full truckload business and a China based trucking company. The sale of YRCW’s equity stake in JHJ to Jin Jiang Investment represents the last remaining non-core international asset in this series of divestitures. The sale is subject to certain regulatory approvals from the Chinese government.

JHJ is a mainland China-based asset-light 3PL and freight forwarder providing services including international ocean and air freight forwarding, warehousing, truck brokerage, customs brokerage, supply chain management, quality control, and other asset-light 3PL services. The Company increasingly specializes in the higher-margin segments of forwarding and logistics, including the transport of oversized project cargo, integrated warehouse operations, individually engineered transportation and logistics solutions, and complete supply chain integration. JHJ has over 1,200 employees and 77 client service locations in major Chinese cities such as Shanghai, Beijing, and Wuhan.

About YRCW

YRCW, headquartered in Overland Park, Kansas, is the holding company for a portfolio of less-than-truckload (LTL) companies including YRC Freight, YRC Reimer, Holland, Reddaway, and New Penn. Collectively, YRCW companies have one of the largest, most comprehensive LTL networks in North America with local, regional, national and international capabilities. Through their teams of experienced service professionals, YRCW companies offer industry-leading expertise in flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence. YRCW is listed on the NASDAQ under the ticker YRCW.

About Jin Jiang International

Jin Jiang International is one of the leading travel and hospitality conglomerates in China, with revenue and assets of approximately USD 9 billion and 6 billion, respectively.

Jin Jiang International has three core businesses: hotel management and investment, tourist services, and transport and logistics. It holds directly/indirectly four listed corporations: Jin Jiang Hotels (2006 HK), Jin Jiang Development (A share 600754, B share 900934), Jin Jiang Investment (A share 600650, B share 900914) and Jin Jiang Travel (B share 900929).

Jin Jiang International has extensive business and equity partnership with prestigious hotel groups such as Marriott, Hilton, InterContinental, Fairmont Raffels, Accor as well as over two dozens of globally renowned corporations such as Japanese Mitsui, JTB, UK HRG, and Swiss Les Roches Hotel Management College.

About BG Strategic Advisors

BGSA is the leading M&A advisory firm focused on the logistics and supply chain industry. The firm specializes in providing CEOs in the logistics and supply chain industry with the tools to maximize their company’s value. BGSA has completed several well-known supply chain transactions, including the sales of PCD to Quality One Wireless, Open Mile to Echo Global Logistics, NESA to Liquidity Services, Access Computer Products to Waste Management, Converge to Arrow Electronics, Dixie Warehouse Services and Wilpak to Jacobson Companies, Churchill to BirdDog, Raytrans to Echo Global Logistics, and many others.

For more information about BGSA, please contact Ben Gordon at ben@bgsa.com and 561-932-1601.

BGSA provides investment banking services through BG Strategic Advisors LLC, a registered broker-dealer and member of FINRA and the SIPC.