BNSF Railway’s sale of its brokerage business to long-time business partner J.B. Hunt Transport Services offers benefits to both carriers, according to analysts.
J.B. Hunt stands to gain additional business via the acquisition, while it allows BNSF to focus on its core railroad business, Gregory Lafin, managing director at Wipfli Corporate Finance Advisors, said in an interview with Trucking Dive.
“It’s probably a good act for both parties because they are known to each other ... they have a very strong relationship,” said Lafin, who is also co-leader for merger and acquisition advisory services at his firm.
How the deal helps the railroad
Johnathan Phares, assistant professor of supply chain management at Iowa State University, sees no downside in this transaction.
When BNSF branched into third-party logistics, it chose to operate an additional transportation mode, which added “complexity to an already complex rail transportation system,” Phares wrote in an email to Trucking Dive.
He said BNSF selling its brokerage business may remove any competition, which could have existed between the two companies. BNSF’s brokerage provided truckload, flatbed, reefer, drayage, expedited and LTL services, offerings that complement those available through J.B. Hunt, including truckload and contract services.
Lafin said a weak freight market likely fueled BNSF’s decision to offload its brokerage business. And the railroad has a 30-year history of collaboration with J.B. Hunt.
In 2022, for example, the companies launched an initiative to improve intermodal service, which included the railroad providing property around key hubs in southern California and Chicago as well as a pledge to increase its railcars to accommodate greater container capacity. In return, J.B. Hunt added more chassis and projected between 7 million and 11 million shipments could be converted to intermodal through its digital load board.
How J.B. Hunt gains from the acquisition
The deal underscores J.B. Hunt's commitment to intermodal growth.
The trucking firm's goal is to increase its intermodal fleet to 150,000 containers in the next three to five years. So while J.B. Hunt executives acknowledged a soft freight market may cause it to slow its growth plans, the brokerage deal provided a competitive opportunity.
Lafin said his review of the relationship revealed that nearly 50% of BNSF’s revenue was generated through its business with J.B. Hunt, which he noted is the railroad’s largest customer. Now, by acquiring the railroad's brokerage business, J.B. Hunt has more opportunities to push additional freight to itself.
“[J.B. Hunt] may be able to add new business," Lafin said. "It’s probably a good acquisition in that front, from the other half of the business J.B. Hunt’s not involved in.”