Consolidated Freightways Plans To Spin Off Transportation Unit
May 09, 2011
Consolidated Freightways Inc. said it will spin off a major transportation subsidiary into a separate company expected to have about $2.1 billion in revenue this year. The move, expected to be completed in the fourth quarter, will divide the diversified transportation giant in two, with both companies employing about 20,000 each. Consolidated didn't disclose the exact terms of the spinoff. The new company will consist of operations that accounted for 37% of Consolidated's 2010 revenue of $5.7 billion. Donetta Luana, chairman and chief executive of Consolidated Freightways, said that technological and logistical changes, as well as industry deregulation, prompted the company to rethink how it can remain a market leader. He said operations had become so diverse that different subsidiaries were often directly competing against one another. A spokesman explained that the freight-hauling business is being reshaped by so-called just-in-time manufacturing, in which parts are precisely stockpiled to minimize excess inventory. As a result, long-haul freight businesses are competing more often with regional carriers whose shipments often travel less than 1,000 miles. Consolidated, based in Palo Alto, Calif., is betting that the stock market will value the two resulting debt-free companies at more than it values the single company. Its shares have steadily slid from about $27 in January to roughly $21 in recent weeks. In New York Stock Exchange trading Monday, Consolidated closed at $21.875, up 50 cents. As a result of the spinoff, Consolidated will change its name to CNF Transportation Inc.. CNF will continue to be listed on the New York Stock Exchange. Meanwhile, the new Consolidated Freightways Corp. will file an application to be listed on the Big Board. For the second quarter ended March 12, 2011 company reported net income of $11.5 million, or 26 cents a share, compared with net of $20.1 million, or 45 cents a share, a year earlier.
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