The largest drayage firm at the ports of Los Angeles and Long Beach was acquired last week as the shipping industry’s short-distance goods transportation sector continued to consolidate.
Long Beach-based California Cartage Co. was purchased by Cherry Hill, N.J.-based NFI Industries Inc. for an undisclosed amount. Both firms move cargo by truck from ports to nearby locations such as warehouses, a practice often referred to as drayage.
“This is the latest in an on-going trend of large logistics companies wanting to be bigger players in the Southern California port market,” said Weston LaBar, executive director of the Harbor Trucking Association in Long Beach, a coalition of West Coast companies. “It just so happened that the latest company acquired was the largest drayage company in the area.”
Transport Topics, a publication that tracks the freight industry, ranked NFI at No. 27 on its 2017 list of largest freight companies in the United States and Canada by revenue at $1.2 billion. Cal Cartage was No. 65 with revenue of $440 million.
The Cal Cartage acquisition adds about 45 new warehousing, drayage, customs examination, transloading and brokerage locations, bringing NFI’s North American presence to more than 250 locations, Chief Executive Sid Brown said via email. Its total employee count is now almost 10,000.
Cal Cartage says on its website that it had 1,200 full-time employees and 1,200 independent contractors, but it was unclear how many workers will transfer to NFI. Cal Cartage did not return calls requesting comment.
“Acquiring Cal Cartage is an opportunity to expand our suite of supply chain solutions while further integrating our international and domestic capabilities,” Brown said. “NFI’s network already spans North America, and the addition of CalCartage provides us with key positions at North America’s major ports.”
The combined company is expected to generate about $2 billion in annual revenue in 2018, he said.
From war to ports
It’s taken more than seven decades for Cal Cartage to reach this point.
The company was founded in 1944 by Neil Curry, making it not only the largest local drayage company, but one of the oldest. He started the business as a truck line moving aircraft parts for companies involved in the war effort, according to his son Robert Curry Sr., who recounted the story in a video when he was the Long Beach Area Chamber of Commerce’s 2010 entrepreneur of the year.
The business model changed in the late 1960s when the younger Curry, who became the company’s chief executive, secured a partnership with several Japan-based steamship lines. Cal Cartage today provides drayage as well as warehousing and distribution, customs examination, and brokerage services.
Curry said in a letter to his employees in late September that he planned to retire and sell the company, the Journal of Commerce reported.
Acquiring an already established company instead of starting from scratch would be ideal opportunity for a company seeking to establish a firm footing in the Southern California drayage market, the Harbor Trucking Association’s LaBar said.
The ports of Los Angeles and Long Beach are the nation’s first- and second-busiest ports, respectively, and together account for $450 billion in annual trade.
Acquisitions in the drayage industry over the last few years include Greenwich, Conn.-based XPO Logistics Inc.’s purchase of Dublin, Ohio-based Pacer International Inc. for $335 million in 2014. Last year Memphis, Tenn.-based IMC Co. purchased Long Beach-based Progressive Transportation Services for an undisclosed sum.
Cal Cartage has been among local trucking companies targeted recently by truck drivers over unfair labor practices.
Some drivers who are designated as independent contractors have been fighting for employee status to relieve themselves of costs incurred while operating a truck. Their independent status leaves drivers – and not the trucking companies – responsible for basic operational costs such as leases, fuel, repairs, maintenance and insurance.
The California Labor Commissioner’s Office issued nine decisions over the past two years on individual claims filed by Cal Cartage drivers working for the company’s subsidiaries – K&R Transportation, Cal Cartage Express, ContainerFreight and CMI, according to Teamsters Union spokeswoman Barbara Maynard.
The office ordered Cal Cartage to pay seven drivers around $1.1 million for labor code violations, including unlawful deductions and unreimbursed expenses. CalCartage settled two cases and is appealing the remaining seven in court, Maynard said.
22 more cases seeking a total of $3.7 million have been filed against Cal Cartage over claims of misclassification, according to the teamsters.
The acquisition, however, does not seem to have anything to do with the labor issues, said Nick Vyas, executive director at USC’s Center for Global Supply Chain Management.
“NFI acquiring CalCartage is purely a consolidation play,” he said. “This is an industry that’s favorable to asset-based players, and those with longstanding legacy businesses are bound to gain in one way or another.”
He said that the acquisition was a symptom of the larger trend in the shipping industry: consolidations in different port supply chain sectors including shipping liners and terminal consolidations.
“I’m sure the opportunity and timing was right for Mr. Curry to sell,” Vyas said.
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