Originally published at jsonline.com on October 15, 2016.
Underlying the plans by multibillion-dollar trucking company Schneider National Inc. to go public are likely the varying desires of different family members to cash in on at least some of their ownership interest.
The freight carrier, one of the country’s largest, has held fast to its private, family-owned status for decades.
But with ownership now extending to members of a third generation, none holding top-level executive posts with the company, the forces pushing toward an IPO seem to have reached critical mass.
It’s doubtful that Schneider, which took in $4 billion in revenue last year and is widely respected in the industry, needs to tap the public market for business purposes.
“I think it’s more about taking care of current shareholders than really anything else,” said Evan Armstrong, president of West Allis-based logistics research and consulting firm Armstrong & Associates Inc. “They probably have enough capital to do whatever they want, as is.”
A Schneider spokeswoman said the company won’t speak about the IPO beyond the brief statement issued little more than a week ago.
But the plans have the industry talking. In the fragmented world of trucking, Schneider is big — employing or contracting with more than 14,000 drivers. And among the industry’s 10 largest companies, as ranked by the Journal of Commerce, only Schneider remains in private hands.
The move also follows another unusual step for the Green Bay firm. Little more than four months ago, Schneider made a rare acquisition, its first since 2006 and the largest in its history. The simultaneous purchase of two intertwined companies didn’t just add generic freight-hauling capacity; it positions Schneider as a leading provider in a specialized field — the delivery of furniture and oversized consumer goods, including to homes.
Together, the IPO and the acquisition suggest new horizons for the company, which has been growing, but less so than the industry as a whole, available data indicate.
The Journal of Commerce annual rankings of trucking companies, prepared by SJ Consulting Group Inc., show Schneider’s trucking revenue rising 8% from 2011 through 2015.
Overall U.S. trucking revenue increased by about 20% over the same period, according to the American Trucking Associations.
Nonetheless, Schneider has “apparently been pretty profitable the last two or three years,” said Noël Perry of industry consulting firm FTR. That bodes well for a public sale of stock, said Perry, who was corporate economist at Schneider from 2003 to 2007.
Al Schneider started the company in 1935, selling the family car, according to the firm’s history, to buy his first truck. But it was his son Donald who guided the company through the perils of deregulation, which sank many legacy trucking outfits, and oversaw its growth into one of the biggest carriers in the nation.
Don Schneider died in January 2012, ten years after stepping down as president and CEO.
In a 2002 interview, he said he and his wife, Patricia, then held 34% of the company’s stock. He said company managers owned about 9%, with the remaining 57% split among others, including his children, brothers and sister.
How the current ownership breaks down isn’t known, but family members clearly hold significant stakes.
On their LinkedIn pages, two of Don and Pat Schneider’s five children identify themselves as directors of the company, while a third lists herself as an owner. And the firm’s statement about the IPO spoke of keeping controlling ownership in the hands of future generations of the family.
But the children have not been interested in running the company, Perry said. He said that as far as he knew, only the youngest, Paul, participated significantly in management — around the same time Perry worked at Schneider — and only for a few years.
When ownership of a company is split among several family members, chances increase that the individual shareholders will have different needs and goals, said George Reis, president of GVR Investment Management, in Two Rivers. One person might want dividend income, for example, while another might not need cash and instead want capital gains growth, Reis said.
“It’s actually surprising this hasn’t come up a little earlier,” he said of the IPO plans.
Another significant advantage Reis sees in a public offering: It will establish a value of the company for estate tax purposes, helping avoid possible problems with the IRS.
With the proceeds from selling a piece of Schneider National, he said, family members also can diversify their assets. Perry sees that as a plus, too.
“If I were in the family, I wouldn’t want all my wealth tied up in one trucking company,” he said.
Armstrong said Schneider sought unsuccessfully about three years ago to sell its logistics business — the wing that manages transportation and supply chain issues for customers as opposed to actually hauling freight. That business, which judging from outside estimates accounts for less than 20% of overall revenue, isn’t the industry force it once was, Armstrong said.
Still, Schneider has long been a leader in truckload, the sector of trucking in which carriers haul trailers containing a single shipment of freight between companies, said Steven Dutro, managing partner of Transport Capital Partners, a mergers and acquisitions adviser.
“Extremely well respected across the industry, so they’re well positioned both because of their size and their capabilities and their history,” he said.
And new rules such as those requiring truckers to replace paper log books with electronic recorders — something Schneider has already done — stand to benefit larger firms like the Green Bay carrier, Dutro said.
Schneider hasn’t yet registered with the Securities and Exchange Commission for a public stock offering, and the company’s statement disclosing the plans left open the possibility of backing away if market conditions aren’t right. In 2000, Schneider announced that it would take its logistics unit public, only to abandon the idea a year later amid the 2001 recession.
Also unknown is the potential size of the offering.
The company as a whole could be worth about $4 billion, said Benjamin Gordon, a mergers-and-acquisitions adviser to logistics and supply-chain companies.
In making his estimate, Gordon, founder and managing partner of BG Strategic Advisors, assumed Schneider’s earnings before interest, taxes and depreciation are at the industry average. And he assumed Schneider stock would trade at the average multiple of those earnings.
All of Schneider won’t be up for sale, however. The announcement earlier this month said the family would retain “controlling ownership.”
The last major trucking IPO came in 2010, when Swift Transportation, a large truckload carrier based in Phoenix, Ariz., sold somewhat more than half its shares in a public offering that raised $806 million.