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Omnitracs to Purchase XRS

  9/8/2014 - Omnitracs to Purchase XRS

Omnitracs has agreed to purchase XRS Corp. for about $178 million, a move that would expand its mobile device offerings and potentially broaden the technology supplier?s reach to new sectors of the trucking industry. ?We believe that mobility is going to be an important market trend, not just in transportation but in all industries,? Omnitracs CEO John Graham told Transport Topics. ?We want to be able to offer flexibility to our customers.? The company expects the acquisition, which was unanimously approved by the XRS board, to close during the fourth quarter. XRS, whose applications are designed to help fleets improve efficiency, safety and regulatory compliance, has been on the leading edge of the trucking industry?s adoption of smart devices for business use. Its current XRS platform runs on a variety of Android and Windows mobile devices, including consumer and commercial-grade tablets and smart phones as well as rugged handhelds. If the deal is approved under federal antitrust law, the transaction would mark Omnitracs? second major acquisition since its separation from Qualcomm Inc. Omnitracs was purchased by Vista Equity Partners for $800 million in November. In December, Omnitracs bought Roadnet Technologies, a provider of routing and fleet-management software to private fleets. Graham said the addition of XRS will complement Omnitracs? existing MCP line of fixed-mount onboard systems by providing more options. He said XRS will enable Omnitracs to improve its reach to small and midsize carriers and private fleets as the company looks to expand its customer base while retaining its strength in the large, for-hire truckload market. Graham said many Omnitracs customers are adamant about having an industrial-grade tele-matics platform tethered inside the cab, but others may prefer the flexibility outside the cab offered by mobile devices. ?We want to be able to serve both sides of that equation,? he said, adding that he doesn?t think one size fits all. ?The acquisition delivers an attractive premium for our shareholders, and for our employees and customers we are thrilled to become a key component of the broader Omnitracs portfolio,? XRS CEO Jay Coughlan said in the joint statement on Sept. 2. ?With complementary solutions designed to meet the varying needs of fleets across the transportation and logistics industry spectrum, our combined organizations can continue to innovate and deliver end-to-end solutions for our customers.? However, at least three law firms announced that they were launching investigations into whether the XRS board adequately sought the best value for the company. Omnitracs said it will pay $5.60 per share of XRS, formerly known as Xata Corp. Clem Driscoll, president of consulting and research firm C.J. Driscoll & Associates, said the deal shows that ?Vista Equity Partners is really serious about building this business and getting Omnitracs back on the growth path, both organically and through mergers and acquisitions.? The deal also indicates that Omnitracs sees mobile devices playing a significant role in the telematics market moving forward, Driscoll added. ?It?s clear that they think mobility is at least an important part of the picture,? he said. ?They probably want to be able to offer anything the customer wants.? XRS originally carved a niche for itself in the telematics market with a traditional in-cab product but began its shift toward mobile devices with its 2009 acquisition of Turnpike Global Technologies. The company fully committed itself to its mobile strategy in August 2012, when it changed its name to XRS Corp. and introduced its latest software platform, also named XRS, which runs exclusively on mobile devices. XRS posted earnings of $631,000, or 3 cents per share, for its fiscal year ended Sept. 30, 2013, but reported a net loss in each of its previous 12 fiscal years. The company?s annual revenue peaked at $70.7 million in fiscal 2010 but declined to $56.2 million in fiscal 2013. XRS stock closed at $3.02 on Nasdaq on Aug. 29, the last business day before the announcement, but spiked on Sept. 2 to $5.52, its highest level in nearly a decade. Prior to announcing its intent to buy XRS, Omnitracs had begun offering a proof-of-delivery application on Android devices as an accessory to its MCP in-cab units. Other telematics providers also have been working smart phones and tablets into their product portfolios. PeopleNet recently announced plans to offer an Android-based version of its software, predominantly on rugged tablets. PeopleNet also offers its applications on rugged handhelds from Intermec and Motorola Solutions. One XRS user expressed concern about the future of the product but added that it was too soon to tell what changes might occur. Eric Hoppe, director of operations at Specialize Global Logistics Services in Ypsilanti, Michigan, said his company has equipped its shorthaul fleet with tablets running the XRS platform. He said that mobile product was ?much more cost-effective? than traditional in-cab systems. A fleet using the MCP200 platform said the proposed merger would expand Omnitracs? offerings. ?I think as the bring-your-own-device market continues to grow, that gives them a bigger footprint,? said John Elliott, CEO of Load One, an expedited carrier based in Taylor, Michigan. Elliott said his company prefers telematics devices that are mounted inside the cab but that he sees the potential benefit of pairing the MCP platform with a mobile device for additional capabilities.

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