For ArcBest CEO Judy McReynolds, the decision to sell one of her company’s divisions was a strategic case of addition by subtraction.
And it was a lucrative addition when ArcBest sold its maintenance and repair subsidiary FleetNet America for $100 million in February 2023 to Cox Automotive, a subsidiary of Cox Enterprises Inc. of Atlanta. It was one of the biggest deals in Arkansas last year.
ArcBest had owned and operated FleetNet since 1995, and the subsidiary generated $343.1 million in revenue in fiscal 2022.
Still, the decision to let it go was in line with the company’s vision of who it is and what it wants to do, McReynolds said. ArcBest, which celebrated its 100th anniversary in business last year, started as a traditional trucking company but has refashioned itself into a diversified logistics company during the past decade.
“As we were looking at our options strategically and as the company has grown with the other logistics offerings that we had, it ended up not being particularly core to us,” McReynolds said. “What [the sale] does is it helps your focus. Our core customers are shippers who are trying to execute their supply chains, whether it is in the manufacturing business or the retail business. If you think about FleetNet customers, they are really carriers or other companies that needed repair and maintenance services.
“It is really two different bases of customers, and we wanted to focus our energy on the logistics customers that we had. We wanted to make sure we invested appropriately in the solutions they needed.”
ArcBest acquired FleetNet in 1995 as part of its $142 million purchase of Worldway Corp. of Charlotte, North Carolina. It started as an internal department for what was then known as Carolina Freight and then blossomed into a national service company.
Along the way ABF Freight, the less-than-truckload division that was the backbone of ArcBest’s original growth and success, became a loyal customer of what became known as FleetNet. McReynolds said that ABF Freight has continued to be a FleetNet customer since the sale.
“We had had it for quite a long time,” McReynolds said. “It was a great entrepreneurial story. It was very helpful for us for decades to have that subsidiary because it gave us insight and expertise into equipment maintenance and repair.”
Options, Options, Options
One of the first moves that ArcBest announced in the wake of the FleetNet sale was that it was designating $125 million for its share buyback program.
When it announced its fiscal 2023 earnings report Feb. 5, ArcBest said it had returned $103 million to shareholders. It also said its board of directors had authorized another $125 million for buybacks in 2024.
Rewarding shareholders wasn’t the only prize, though, for the company. McReynolds said the influx of capital from the sale, which was more than $52 million after taxes and expenses, will allow the company to increase its technological investments.
McReynolds said ArcBest allocates about $175 million annually for its “technology spend.”
One such technology initiative is an intricate loading system ArcBest calls Vaux that the company launched in 2023. ArcBest paused the rollout of the freight handling program in the third quarter of 2023, but McReynolds has high hopes for the innovative system.
“That is an example of a technology play, an organic effort,” McReynolds said. “That isn’t something we acquired; it’s something we developed. That is the beauty of having an internal innovation and R&D team at ArcBest.
“We have good customer interest and we are in several pilots and in discussions for more. It will take some time to unfold, but we are really excited about it.”
McReynolds said ArcBest put FleetNet on the market in early 2022 and had the luxury of patience to find a good deal. McReynolds said the $100 million sales price was what the company expected.
“It is a testament to the business that the FleetNet team had put in place,” McReynolds said. “It was more technology-driven toward the end of its part of our company than it was in the beginning. That was really attractive to Cox Automotive.
“It is a large price, but the company had really grown and developed into a company that warranted that price. In order for FleetNet to be successful, they needed a parent company or an owner that was really going to help them grow into the future. Cox was better positioned to do that.”
And now ArcBest is positioned for its future, which McReynolds started mapping out way back in 2010 when she took over as Arkansas Best’s CEO the year after the company lost nearly $128 million. Under her leadership, ArcBest rebranded itself and remade itself into what McReynolds calls an integrated logistics company.
“What we are trying to do when we say integrated is a customer needs to move their goods from Point A to Point B, or they need us to help them optimize their supply chain,” McReynolds said. “What we are doing with that is helping that customer navigate their needs but also providing the solutions they need. That is a different customer base, and what we are doing is really effectively leaning into that customer base and making sure we have the dollars to invest in the solutions they need.”