On BCI's Investment in PS Logistics

Sarah Min of Chief Investment Officer reports BCI and Gamut to invest in transportation firm PS Logistics:

British Columbia Investment Management Corp. (BCI) is investing in US transportation and shipping company PS Logistics, in partnership with a middle market investment firm, Gamut Capital Management. 

Terms of the transaction were not disclosed by the Canadian institutional investor and New York-based private equity firm Gamut Capital, but the deal is expected to close in this year’s third quarter, Gamut said last week.

“As a long-term investor, we seek market-leading companies with a demonstrated track record of creating shareholder value,” Aaron Papps, senior portfolio manager at BCI, said in a statement. “We look forward to working with the founder-led management team and Gamut to support the company’s future growth.”

Headquartered in Alabama, PS Logistics provides flatbed transportation of goods across the US and specializes in irregular routes that carry cargo to wherever destination it needs to go, the firm said. 

Recently, PS Logistics has been expanding its business into other parts of the continental US. In March, the flatbed shipping company disclosed that it had purchased “substantial” assets from Jason Jones Trucking and acquired the company’s fleet of 38 tractors that operate in the eastern United States. 

Interest in the logistics sector has not dampened among investors who are betting on the continued growth of e-commerce. This year, industrial real estate investment trusts (REITs) such as warehouses and distribution centers have jumped 16.7% year to date. 

About 10%, or US$14.5 billion (C$17.9 billion) of the US$139 billion (C$171.3 billion) in assets that BCI has under management, is invested in private equity. The Canadian allocator takes a sector focus into the industrial, health care, financial and business services, technology, and retail sectors. 

BCI put out a press release on this deal:

Gamut Capital Management, L.P. (“Gamut”), a leading New York-based middle market private equity firm, in partnership with British Columbia Investment Management Corporation (“BCI”), one of Canada’s largest institutional investors, announced they have signed a definitive agreement to invest in PS Logistics.

As the largest and fastest-growing flatbed transportation and full-service logistics provider in the United States, PS Logistics employs a “Driver-First” culture to transport general flatbed commodities with a specialization in irregular route service in the continental United States.

“The combination of our exceptional team, with the resources we will gain through our relationship with Gamut and BCI, will enable PS Logistics to accelerate our growth while continuing to provide best-in-class services to our customers,” said Scott Smith, CEO of PS Logistics.

Stan Parker, Founding Partner of Gamut, said, “We are excited to partner with Scott and his seasoned management team to enhance their market leading platform and accelerate their growth trajectory. As the leading player in the large and fragmented flatbed trucking market, PS Logistics’ dedicated drivers, expansive freight network and young fleet are poised to continue delivering great value to both new and longstanding customers in search of comprehensive cross-country coverage and services.”

“As a long-term investor, we seek market-leading companies with a demonstrated track record of creating shareholder value, like PS Logistics. We look forward to working with the founder-led management team and Gamut to support the company’s future growth”, said Aaron Papps, Senior Portfolio Manager at BCI. “The continued growth and success of PS Logistics will provide compelling risk-adjusted returns for our pension plan and insurance fund clients.”

Financial terms of the transaction are not disclosed. The transaction, which is subject to customary closing conditions, is expected to close in the third quarter of this year.

RBC Capital Markets, Credit Suisse and Deutsche Bank Securities Inc. served as financial advisors and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal counsel to Gamut and BCI, and Weil, Gotshal & Manges LLP served as separate legal counsel to BCI. UBS Investment Bank served as exclusive financial advisor and Kirkland & Ellis LLP served as legal counsel to PS Logistics. RBC Capital Markets, Credit Suisse, Deutsche Bank Securities Inc. and Wells Fargo Bank, N.A. are providing financing commitments for the transaction, subject to customary terms and conditions.

About PS Logistics

Founded in 2004 and headquartered in Birmingham, AL, PS Logistics is one of the largest and fastest growing flatbed transportation and logistics providers in the United States. PS Logistics provides full-service transportation services, including asset-based transportation, non-asset-based transportation, brokerage, third-party logistics managed transportation, warehousing, and supply chain services. This hybrid model delivers optimal flexibility to address customer’s flatbed transportation needs across various industries throughout the United States. For more information, visit: www.pslogistics.com.

About Gamut Capital Management

Gamut Capital Management is a New York-based private investment firm managing $1.2 billion in assets focused on the middle market. Founded in 2015, senior deal professionals have executed investments in over 50 companies in North America and Europe. To learn more, please visit www.gamutcapital.com.

About BCI

With C$171.3 billion of assets under management as of March 31, 2020, British Columbia Investment Management Corporation (BCI) is one of Canada’s largest institutional investors. Based in Victoria, British Columbia, BCI is a long-term investor that invests across a range of asset classes: fixed income; public equities; private equity; infrastructure; renewable resources; real estate; and commercial mortgages. BCI’s clients include public sector pension plans, insurance, and special purpose funds. BCI’s private equity program, with C$17.9 billion of assets under management, has a well-diversified portfolio comprised of direct and fund investments. The team brings industry expertise with more than 30 investment professionals investing across financial and business services, healthcare, industrials, consumer, and TMT sectors. For more information about BCI, please visit www.bci.ca.

This deal got me curious about flatbed transportation and logistics providers in general, and PS Logistics and Gamut Capital Management in particular.

First, Gamut Capital Management is a private equity firm committed to building partnerships to drive long-term value creation:

 We are nimble yet disciplined. Our flexible mandate allows us to customize solutions for companies and make control and control-like investments across every part of a company’s equity and debt capital structure. The Gamut investment team takes a complex look at the middle market and leverages several decades of combined investing experience through various market cycles in a broad range of old and new economy industries, to identify contrarian, value-oriented, and growth opportunities. We're focused on building partnerships with management teams, private owners/founders, and other stakeholders to drive long-term value creation through novel and complex transaction structuring, as well as detailed company-specific underwriting, operational acumen, and long-term strategic planning. 

We approach partnership in its broadest and most transparent sense. Our focus includes bolstering management’s financial flexibility through creative structuring, supplying strategic resources to help fuel growth, and access to proprietary transactions. The Gamut team works hand-in-hand with management to create processes and infrastructure to ensure long-term organic growth, and to provide insight and leadership to help navigate an ever-changing commercial environment and an increasingly complicated capital markets landscape.

The Gamut Team

The Gamut founders honed their experience over a combined 30 years working at one of the most sophisticated financial investors in the world. Together, with their team of professionals, Gamut is seeking to be the most financially sophisticated, downside protection focused and value-oriented investor in the middle market.

And here are Gamut's portfolio companies:

It gives you an idea as to why Jim Pittman, the head of Private Equity at BCI, and his team decided to work with Gamut on this deal to help PS Logistics grow its operations. 

Now, as far as PS Logistics, the company is one of the largest and fastest growing flatbed transportation and logistics providers in the United States, specializing in irregular routes but it also provides full-service transportation services, including asset-based transportation, non-asset-based transportation, brokerage, third-party logistics managed transportation, warehousing, and supply chain services. 

 

This hybrid model delivers optimal flexibility to address customer’s flatbed transportation needs across various industries throughout the United States. 

The company is growing fast and in March, it announced the acquisition of Jason Jones Trucking:

 PS Holdco, LLC (“PS Logistics”) announced today that it has purchased all substantial transportation assets of Jason Jones Trucking, Inc., a privately-owned interstate trucking company that specializes in flatbed shipping in the eastern United States.

Headquartered in Shoals, IN, Jason Jones Trucking (“JJT”), maintains a fleet of 38 tractors, 89 trailers and 41 experienced drivers. JJT primarily hauls general freight, including drywall gypsum, lumber and brick – types of freight which PS Logistics also specializes in.

“JJT brings great freight synergies to both our companies as well as our customers,” said Mr. Scott Smith, Chief Executive Officer of PS Logistics. “It also further establishes our base in the upper Midwest and adds a new terminal to our growing national network.”

JJT operates as a family-run business with a loyal driver base and strong customer relationships. The acquisition will provide JJT and its customers with additional capacity, new service offerings, and increased economies of scale.

Organizationally, JJT will be managed by Mr. Jason Jones and report into P&S Transportation (“P&S”) as a separate division under the leadership of Mr. Steve Reid, a P&S VP of Operations. JJT will continue to operate under the “Jason Jones Trucking” brand name.

“PS Logistics is an amazing partner for our business,” Jones said. “Both our companies are family-oriented and share positive workplace practices, creating an ideal environment for everyone to grow and prosper.”

The JJT acquisition continues the PS Logistics acquisition strategy of partnering with families and owners within the flatbed trucking segment. Since 2007, PS Logistics has successfully acquired 21 trucking and brokerage operations. Financial terms of the JJT transaction were not disclosed.

In order to grow its operations, PS logistics needs capital and that's where Gamut and BCI come in. They structured financing terms that will allow this company to grow through acquisitions and organically, all while it maintains full control of its operations. 

This a great long-term deal in the mid-market space with a partner who specializes in this area.

In a related item, to enhance its private equity program, on July 1, 2021, BCI finalized a property lease in New York City (NYC) to establish its first office outside of Canada:

We have significant capital to deploy directly and with partners to our targeted sectors, including healthcare, industrials, financial services, technology and telecommunications, and business and consumer services. As a long-term, global investor, BCI has existing investment partnerships in NYC. Establishing a local private equity team in the largest global investment hub will foster new relationships, while generating additional opportunities to invest capital through our direct and fund investment programs.

The opening of this office is an important step in our evolution and delivery of our purpose: to contribute to the financial retirement security of our clients’ more than 675,000 pension plan members and to allow our insurance clients to provide coverage for over 2.5 million workers and 240,000 registered employers, as well as provide auto insurance to B.C. motorists.

We anticipate a possession date in early 2022 and will share more details as work to establish the office progresses.

It makes sense to have a team on the ground in New York City to foster new relationships, while generating additional opportunities to invest capital through their direct and fund investment programs.  

Lastly, Gordon Fyfe, BCI’s CEO/CIO, will serve on the inaugural Advisory Council for the Canada-India Business Council alongside globally-minded leaders with deep bi-national market experience:


And the World Economic Forum has published an article by BCI's Stefan Dunatov, executive vice president, investment strategy & risk. "AI won't replace investment managers, but it could improve returns" examines the potential impact of artificial intelligence on pensions and savings in the years ahead:

Alright, I will wrap it up there

Below, a few clips from the PS Logistics channel to acquaint you with it operations. 

Update: BCI just announced the appointment of Ramy Rayes as acting executive vice president, investment strategy & risk. He is responsible for setting, implementing, and monitoring our clients’ investment strategies and providing independent advice to BCI’s stakeholders.

 

Congratulations to Ramy Rayes, heard nothing but god things about him.

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