Daseke Builds Empire by Merging Family-Owned Trucking Firms

December 11, 2018 by Alan Adler, @AlanAdler

Don Daseke has built the nation’s largest public flatbed and specialty trucking company by sticking to his policy of not purchasing a company that’s already for sale.

The former real estate entrepreneur avoids companies already on the market because they typically are losing money or are poorly managed, he told Trucks.com.

“Companies are for sale for a reason,” Daseke said. “I want companies that are not for sale.”

The 18 companies Daseke Inc. (pronounced Dass-key) has purchased since 2009 haul oversize shipments like wind turbine blades and aircraft wings. The U.S. Capitol Christmas tree recently crossed the country on a Daseke-owned flatbed.

A look at Daseke acquisitions:

(Chart: Daseke Inc.)

Each company Daseke acquires keeps its identity, management and customers. But the businesses pool their equipment to make the most of a combined 6,040 tractors and 13,284 trailers. The chief executives of the companies meet quarterly to plot strategies to make Daseke more efficient.

Yet despite “strong buy” recommendations from analysts who cover the company, Daseke stock has lost more than 70 percent of its value this year. Most of the decline came before a recent widespread market selloff. Daseke traded at a 52-week high of $14.52. It closed Monday at $3.33.

“The stock is completely disconnected from the underlying fundamentals of the Daseke business,” said Paul Penney, an analyst at Northland Capital Markets.

Analysts who follow the company generally praise its business performance. Through the first nine months of this year, Daseke swung to a profit of $14.9 million from a loss of $11.8 million in the same period a year earlier. Revenue rose 89 percent to $1.1 billion.

Daseke reported $30 million in revenue and $6 million in earnings in 2009. Last year, it reported $1.3 billion in revenue with earnings of $141 million.

Daseke says the company is levering its size to get better prices on diesel fuel, tires, parts, warranties, roadside assistance and trucks themselves.

Daseke may be getting those savings, but, Penney said, he would like to see proof.

“The company needs to show their homework,” Penney said. “Give us a case study.”

Real Estate Magnate

Don Daseke calls himself an “accidental trucker” who rose from modest Midwest roots. He attended DePauw University on a scholarship and earned an MBA from the University of Chicago.

Don Daseke as a DePauw graduate (Photo: Daseke Inc.)

He later built a 55-room hotel on the DePauw campus that foreshadowed a 28-year real estate career. Daseke founded Walden Residential Properties, a real estate investment trust of 42,000 apartments that went public in 1994 and sold for $1.7 billion in 2000.

When an investment banker friend pitched buying a flatbed company near Seattle, he bit, despite having no knowledge of trucking.

In 2009, Daseke made Smokey Point Distributing in Arlington, Wash., his first trucking acquisition. Two years later, he acquired E.W. Wylie in West Fargo, N.D.

The Roll-Up

Daseke wondered whether a national company dedicated to flatbed and specialized trucking existed. It didn’t. So he launched one, often staying in touch with owners of family-owned flatbed carrier companies for years before beginning negotiations.

“We had been in business since 1959, and were not contemplating selling,” Phil Byrd, chief executive of Bulldog Hiway Express in North Charleston, S.C., told Trucks.com. “But he kept after us, and we finally relented.”

In 2013, Daseke added four companies. One more followed in 2014, with two more in 2015. In 2017, he acquired seven companies, followed by two this year. He’s paused again to allow the business to absorb its latest acquisitions.

Daseke’s companies haul oversize loads like wind turbines or the nation’s Christmas tree. (Photo: Daseke Inc.)

“We always worry about (integration) in a roll-up,” Jason Seidl, an analyst at Cowen Inc., told Trucks.com. “So far, so good.”

Courtships

Daseke encourages prospective targets to “get the skinny” from other Daeske companies on what being part of a public holding company is like.

“It’s like you talking to one of your future in-laws before you get married,” Daseke said.

In addition to financial-reporting deadlines, the top change when a company becomes part of Daseke is that its trucks and trailers become part of a flexible pool to be tapped by sister companies when needed.

(Chart: Daseke Inc.)

“We almost automatically have each other’s back,” said Byrd, whose company owns 200 trucks and contracts with 60 owner-operators. “We have the elasticity to grow into the right size almost overnight.”

Some arrangements are more formal.

Glendale, Ariz.-based Roadmaster Group’s Tri-State division carries arms, ammunition and explosives to military bases around the U.S. One of its competitors, R&R Trucking in Joplin, Mo., also joined Daseke in 2017. The two have combined operations, creating a military and hazardous-cargo specialty unit.

Daseke Link is an online load board that tracks the location of all the company’s trucks, in use or not, and how long it would take to redeploy them.

Employee Benefits

Driving the type of specialized cargo that travels on flatbeds can be harder than typical long-haul trucking. Because of its size, the cargo often requires covering with 100-pound tarps secured by heavy-gauge chains that drivers must wrestle into place.

  • daseke gallery5
  • daseke gallery7

To attract drivers willing to do that work in the face of a persistent industry shortage, the Daseke carriers offer a 401(k) pretax savings plan with a 4 percent company match and health insurance. Daseke awarded stock to all employees when the company went public in 2017. Daseke also is piloting a salary-and-bonus pay plan in a couple of its companies as an alternative to the industry’s standard pay-per-mile-driven.

“I think that mileage pay is the single biggest systemic flaw in our industry,” said John Wilbur, Roadmaster chief executive. “I think it contributes to the driver shortage and 90 to 100 percent average driver turnover.”

Roadmaster has paid drivers a salary and bonus for extra miles driven since 2012. Its turnover is less than 50 percent, compared with a 96 percent average for long-haul trucking.

“Trucking has never been a job that you talk about at cocktail parties,” said Seidl, the Cowen analyst. “It doesn’t have that social prestige. Anything that helps gain you more respect is good.”

Yet Daseke stock currently is getting no respect.

Stock Woes

“In my wildest dreams, I would not expect the stock to sell off as aggressively as it has,” said Penney, who has a target price of $17.50.

Some investors were miffed when Daseke included shares priced below market value in some of its acquisitions, Seidl said. The decline in Daseke’s stock price is leading investment managers to sell before the end of the year to claim a tax loss, Seidl said.

Consistent earnings, additional guidance on results and a corporate repurchase program of depressed shares would send positive signals to potential investors, said Seidl, whose target price is $11.

“A stock buyback would give a signal that there’s not something wrong,” he said. “When a stock is (trading) below $5, a lot of firms won’t invest.”

Staying the Course

Don Daseke, who retains a majority stake in the company, contends the stock is undervalued. He recently signed a new five-year contract as chief executive. He will turn 80 years old in 2019.

“I have never done anything in my life that I’m more enthused about than what we’re doing right now,” he said. “We’re building a unique company, and we’re doing it a different way.”

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One Response

  1. john mitchell, CPA

    It would be very comforting to investors if there was some insider buying of the stock at these levels.

    Reply

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