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Daseke (DSKE) Upsizes Stock Offering

By Steven Ralston, CFA


Yesterday, Daseke (NASDAQ:DSKE) announced the upsizing of its public offering of common shares. The stock offering was upsized to 5,292,000 commons shares (4,882,167 common shares by Daseke Inc and 409,833 common shares by stockholders). Total net proceeds are estimated to be approximately $55.4 million to Daseke Inc. and approximately $4.6 million to the selling stockholders. The company’s net proceeds will be used for general corporate purposes, such as working capital needs, capital expenditures, debt repayment or financing future acquisitions. Stifel, Nicolaus & Company and Cowen and Company acted as joint underwriting managers.

Earlier this month, on September 1, 2017, Daseke closed its 4th merger of 2017 with The R&R Trucking Companies becoming part of the Daseke family of open-deck & specialized trucking companies. As a U.S. government approved carrier of arms, ammunition and explosives (AA&E), R&R adds new capabilities and further diversification to Daseke’s cargo mix. In 2016, R&R Trucking generated revenues of approximately $52 million and $6.5 million of Adjusted EBITDA.

R & R Trucking is a premier, specialized truckload carrier of sensitive cargo. The trucking company strives to be the safest, most dependable transporter of security sensitive cargo, especially since it provides freight services to the Department of Defense, the Department of Energy, the radioactive materials market and commercial explosives customers in North America. R & R Trucking transports hazardous materials such as flammable and nonflammable gases, flammable liquids and solids, spontaneous combustibles, oxidizers, corrosives, explosives, infectious substances, poisons and radioactive materials. R & R also offers asset-based logistic and brokerage services; container and LTL services through a fleet of dry vans, reefers, flatbeds and specialized trailers. 

Over the last five months, Daseke has merged with four open deck companies: Schilli, Big Freight, The Steelman Companies and The R&R Companies, which combined generated approximately $218 million in revenues and $26 million of Adjusted EBITDA during 2016. The four companies align well with Daseke’s configuration of asset-light scalable capacity with an estimated 50% of revenues being asset-light or logistics-related.

The average purchase price for The Schilli Companies, Big Freight Systems, The Steelman Companies and The R&R Companies was 5.4 times 2016 Adjusted EBITDA. After the mergers, Daseke owns over 3,800 tractors and 8,200 trailers, along with approximately 1.2 million square feet of industrial logistics, warehousing and distribution operations. The R&R Companies added approximately 300 tractors and 900 trailers.

In addition, rates in the flatbed and specialized transportation markets continue to improve.

Management is on track to achieve its guidance of $140 million in proforma Adjusted EBITDA, especially since capital is available under a revolving line of credit ($70 million) and a delayed draw term loan ($23.7 million) in addition to the $20 million on the company’s balance sheet and the approximate $55.4 million from the recent common stock offering.

Based on comparative analysis that utilizes the valuation metric of EV/EBITDA, an average industry multiple indicates a share price target of $17.00.


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