Preston Trucking Co. Inc., an Eastern Shore-based regional hauler acquired five years ago, said yesterday that it would become an independent company once again through a management buyout.
Yellow Corp., a public company based in Overland Park, Kan., agreed to sell Preston to a group of three senior managers. Terms weren't disclosed.
Preston management hopes to complete the deal, which is contingent on a new labor agreement with the company's drivers, by the end of the month.
"There's virtually no synergy created among trucking companies when they join together," said Sean Callahan, Preston's chief financial officer and one of the acquiring executives.
"We were spun off debt-free to make a go at it on our own," he said. "We will be able to do the things that matter to regional customers probably more effectively than we could under Yellow."
Preston serves the Northeast and the mid-Atlantic and central states, and has about 190,000 customers, he said.
With 5,700 employees -- 700 in Maryland -- and 61 terminals, it is the 23rd largest trucking company in the country, said Callahan, who has worked at Preston since 1972.
Besides Callahan, the other members of the buyout team are President David Letke, who worked for Yellow for 25 years and joined the Preston subsidiary in 1996, and Chief Operating Officer Nick Marino, a 20-year veteran of the parent company who joined Preston in 1994.
Yellow, one of the nation's largest long-haul trucking companies, bought the carrier in 1993 for $24 million in cash and the assumption of sizable debt. At the time, Preston Trucking Corp. was one of Maryland's largest and oldest publicly traded companies -- and on the brink of bankruptcy.
After being acquired, Preston -- which became an autonomous, independent regional trucking subsidiary with headquarters remaining in Caroline County -- never lived up to Yellow's expectations, said Kent Politsch, a Yellow spokesman.
Preston contributed $451 million, or 13 percent, of Yellow's $3.35 billion in revenue last year, he said.
"It appears to be a beneficial move for buyers and sellers," Politsch said. "The Northeast region is a very tough market with numerous regional competitors. We certainly believe Preston can it as well as anyone."
Yet the future of a company with such a dubious history is quite uncertain, said Burton Strauss, an analyst with Dominick & Dominick.
"Under new management, it could make some money," Strauss said. "But it was a marginal operator for Yellow the whole time and it's setting off to be an independent regional carrier in a very competitive area."
Whether it is successful depends partially on negotiations on a new five-year labor agreement between the new management and the Teamsters union, he said.
Preston currently pays its Teamster employees 8 percent below the National Master Freight Agreement, as detailed in a contract carriers reached in February, said Callahan, the chief financial officer.
Talks with the Teamsters, which represent 3,500 of Preston's employees, are scheduled to begin next week.
"We're confident the talks will end well," Callahan said. "Our employees have operated under a wage freeze and we recognize that can't go on indefinitely.
"We think that if we get a 5-year labor agreement, it will go a long way in helping us create stability," he said. "And that will get us going."
Pub Date: 6/02/98