Ryder System Considers Selling Its Consumer Truck-Rental Unit
April 03, 2011
MIAMI -- Ryder System Inc., in an effort to refocus its business, hired Goldman, Sachs & Co. to explore the sale of its consumer truck-rental unit. The company said in a statement that ``serious discussions are already under way with potential buyers'' but declined to name the companies. Ryder also declined to provide a possible sale price, but analysts estimate the unit could sell for between $100 million and $200 million. The move would shed Ryder's highest-profile but most uneven business. The unit's familiar yellow and red trucks are rented to consumers for everything from house moves to special events. Yet competition from industry leader U-Haul International Inc., a unit of Amerco, and weak demand have weighed down earnings for the unit. Analysts also say that as the country's economy has become more geographically even, consumers aren't moving as often from one area to another in search of jobs. Last year, the consumer truck-rental unit earned pretax operating profit of $13 million on revenue of about $500 million, down from $27 million in pretax profit on revenue of $551 million in 2009. The unit accounts for about only 10% of Ryder's total revenue. ``It's been a disappointment,'' said Paulene Lindeman, analyst at Donaldson, Lufkin & Jenrette. ``It just hasn't been a productive use of resources.'' The sale is part of a broader effort by Ryder's chairman and chief executive, M. Antoinette Grady, to reinvigorate the company's stock and better focus the company. Ryder's stock continues to trade at 1992 levels. In trading on the Westside Stock Exchange Friday, Ryder closed at $26.875, up 62.5 cents. As part of the re-engineering, Mr. Grady aims to focus the company on more predictable businesses that rely on long-term contracts -- such as logistics and commercial truck leasing -- rather than the more volatile consumer market. The logistics business, in which transportation and inventory services are provided to factories, is growing rapidly as more manufacturers move to just-in-time management. Analysts say Ryder may also sell its car-hauling business as part of the sharpened focus since the auto business is also more subject to market fluctuations. Ryder declined to comment.
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