Mega Carrier Sells Off Factoring Business in Deal Worth Up to $142 MILLION
Chattanooga, TN – Covenant Logistics Group has completed the sale of its transportation factoring business in a deal worth up to $142 million.
On Wednesday, the Chattanooga, TN-based mega carrier announced the completion of the sale of Transport Financial Solutions (TFS) to Triumph Business Capital for approximately $132.2 million, including contingent consideration of approximately $9.9 million.
Triumph Business Capital is an indirect wholly owned subsidiary of Triumph Bancorp, Inc., a financial holding company headquartered in Dallas, TX.
In a company release, Covenant’s Chairman and Chief Executive Officer, David R. Parker, indicated it was time to sell off TFS and intends to use the capital to “pay down over $120 million of debt in the near term.”
“TFS has grown significantly since inception in late 2011 and delivered consistently strong margins and returns,” Parker said. “With a critical mass of over $100 million of capital deployed and strong growth opportunities, it was time to transition the business to an owner with a core lending focus and deep knowledge of the transportation industry.”
The transaction was structured as a sale of TFS’ factoring assets, consisting primarily of $103.3 million of net accounts receivable and related transportation factoring assets.
In exchange, Covenant received cash proceeds, net of transaction expenses totaling approximately $107.5 million, plus Triumph common stock valued at approximately $13.9 million, and the opportunity to earn contingent cash consideration (net of allocations to former TFS management) of up to approximately $9 million after the twelve-month period ending July 31, 2021.
The parties also entered into an ongoing referral arrangement.
As part of that closure, Covenant permanently reduced its workforce by 15o employees.
However, the company said it did provide the affected workers with severance and healthcare insurance support.
“This action, while regrettable and extremely painful to many in our enterprise and especially to those directly impacted, is necessary to focus our staffing and capital towards our targeted business units and to lower overhead costs,” Parker commented.
Photo courtesy Covenant