Echo Had Another Serious Suitor Before Accepting Jordan's Bid, Filing Says

By Tuesday night, it had become a matter of public record that a serious suitor for Echo Global Logistics Inc. had emerged before the Chicago-based freight broker accepted in early September a $48.25-per-share all-cash buyout from private equity firm The Jordan Co., topping the unnamed suitor's $47-a-share cash bid.

The question is who?

Bascome Majors, an analyst at Susquehanna Investment Group and someone who typically doesn't flirt publicly with M&A speculation, said Wednesday that the "evidence points" to Amazon.com, Inc. AMZN as Echo's suitor. In a note published Wednesday, Majors said the pieces of the puzzle fit appropriately enough for him to go public with his thoughts. For one, on July 5 Andy Jassy officially took over for Jeff Bezos as Amazon's president and CEO; the next day, the president and CEO of a company identified by Echo ECHO in a Tuesday SEC filing only as "strategic company A" texted Echo CEO Douglas Waggoner asking for a dinner meeting in Chicago on July 19. (Waggoner accepted the invitation.)

Majors also cited language in Echo's filing, a prospectus seeking shareholder approval for the merger with Jordan, that the unnamed acquirer was one of nine companies that had expressed interest in acquiring Echo in 2019, but that nothing came of the discussions. The same year, Amazon launched its freight brokerage pilot program, Majors said.

The unnamed acquirer raised concerns about potential "customer and carrier overlap," suggesting the company had an existing brokerage business, Majors said. In addition, Echo's board became worried about potential antitrust issues as it was evaluating the acquirer's offer, according to the filing. Amazon has been at the center of antitrust controversy over the manner in which it operates some of its businesses.

Majors arrived at his conclusion in part through a process of elimination. For various reasons, he ruled out Schneider Inc. SNDR, J.B. Hunt Transport Services Inc. JBHT, Landstar System Inc. LSTR, and C.H. Robinson Worldwide Inc CHRW, as well as several big European transport and logistics providers.

In a Wednesday email, Majors emphasized that he's "not unwaveringly confident" in his view, but that an analysis of Echo's filing made him feel "confident enough to share the idea and see what sticks." He said in his note that there's "no smoking gun" leading him to Amazon. What is certain is that because the suitor had strategic motivations for the acquisition, the bid did not come from a private equity firm, he said.

What is more linear, Majors said, is that an appetite exists to spend $1 billion or more to acquire a broker. That raises the possibility of XPO Logistics Inc.'s XPO brokerage business or privately held brokers being in play, he said. Brad Jacobs, who runs XPO after its spinoff of logistics unit GXO Logistics Inc. GXO, said when the spinoff took effect in early August that XPO had no plans to sell its brokerage business, which has performed well. 

Majors said that no publicly traded brokers would be in the mix; once Echo is taken private, Robinson would be the only public company that would come close to being considered a pure-play broker.

Waggoner would not comment on the speculation. Amazon was not available to comment.

Like Majors, others could do more than engage in educated speculation. C. Thomas Barnes, head of global network partnerships at logistics IT provider project44, said he wouldn't be surprised if Amazon was the unidentified company, saying an Echo acquisition would have given Amazon access to terrific technology, a large network of shippers and carriers, and a massive logistics presence in Chicago — something that Amazon lacks.

In contrast, Satish Jindel, founder and CEO of consultancy ShipMatrix, said Amazon would have no reason to acquire Echo. The Seattle-based e-tailer has a successful track record of building logistics capabilities in-house, and brokerage would be no exception, Jindel said. In addition, if Amazon was truly serious about buying Echo, it could have very easily topped Jordan's final $1.3 billion bid, he said.

The 163-page prospectus devotes about 12 pages to the chronology of the proposed acquisition. At the July 19 dinner, almost a month after Jordan made its initial $40-a-share all-cash bid, the CEO told Waggoner that the company was interested in pursuing strategic transactions with complementary businesses and that Echo was a potential target, according to the filing. No details of a proposed transaction were discussed at the dinner, the filing said.

On Aug. 16, the unnamed company sent a letter to Echo expressing interest in buying the company for between $44 and $47 a share in cash. In the letter, the company said it would be prepared to reach a definitive agreement within three to four weeks. However, the company said it would withdraw its offer on Aug. 18 if it was not granted "exclusivity," effectively meaning it would be the only company negotiating with Echo at least for a period of time. Echo's board balked at the demand and set a deadline of the first week of September for a final bid to be submitted.

On Aug. 30, the company submitted a detailed draft of a merger proposal that included, among other things, a requirement that it would control all strategy and communications relating to antitrust approvals. The ante was upped from there. Jordan, notified by its advisers that a superior competing offer was on the table, raised its bid on Sept. 7 to $44 a share in cash. The unnamed company matched the offer and set a Sept. 9 deadline for the offer to expire unless it was allowed to negotiate exclusively with Echo.

Echo's board convened on Sept. 8 to weigh both offers. It decided that, because of the potential disruption to the company's business relationships, the cost of a failed transaction with the strategic buyer would be more harmful than the damage done if the Jordan deal fell through. At the same time, the board agreed that the unnamed acquirer had the means to raise its bid beyond $44 a share and that Jordan might not be able to match it.

In the meantime, both acquirers raised the stakes — to $46.50 a share — and made adjustments to break up fees and reimbursements to Echo should the transaction fall apart due to antitrust concerns. By then, however, Echo's mind was made up. It informed the strategic buyer on Sept. 8 that it would accept the Jordan offer, citing the elevated antitrust risk of heading in the other direction.

Undaunted, the strategic acquirer boosted its offer to $47 a share in cash, with its CEO saying it was its best and final bid. Jordan then countered with a $48.25 all-cash offer conditioned upon the merger agreement being executed after the financial markets closed Sept. 9. 

But the horse had left the barn. That evening, the Echo-Jordan deal was consummated, and the next morning the transaction was announced.

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