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Ryder Acquires Euroway Group

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Ryder System Inc. (R - Free Report) , the world's largest provider of integrated logistics and transportation solutions acquired Euroway Group Ltd., a U.K based commercial truck leasing, maintenance and fleet management company.

Though the deal terms remain undisclosed, the acquisition is reported to add meaningful synergies to Ryder’s existing business in maintenance and fleet management services. The acquisition is expected to generate annual revenues of £12.8 million (approximately $20.2 million) for the company. It would add 1,400 vehicles including trailers, 560 full service lease and over 800 contract maintenance vehicles. Further, Ryder would also gain 53 employees of Euroway and three leased facilities in the U.K.

Ryder is also likely to benefit from Euroway’s strong base of contractual high end customers that would strengthen the company’s foot hold in key markets. On the other hand, customers of Euroway would now be able to access Ryder’s vast network of operation and diversified service offerings.

Acquisitions play a key role in Ryder’s businesses structure, with the company having benefited greatly by most of its business takeovers to date. Ryder has significantly expanded and tapped new business opportunities by acquiring several companies.

In early 2011, Ryder System’s acquired Carmenita Leasing, Inc. and Scully Companies Inc., through which it gained access over a large fleet of vehicles and contractual customers. Further, in June 2011, the company acquired Hill Hire PLC, a leading British company for commercial truck leasing, rental and maintenance with a strong foothold in contractual businesses in the U.K. The deal is expected to foster Ryder’s business expansion in heavy duty vehicle contract (full service lease) and rental markets in the U.K.

We believe Ryder continues to benefit from strong commercial rental and used vehicle sales backed by favorable lease rate environments. In addition, strategic acquisitions and increased investments on vehicles provide potential long-term growth for the company.

However, we remain concerned about the challenging economic environment surrounding its operations despite its strong performance. Further, heavy capital expenditures, a distressed cash position, lower demand on tighter truckload market and competition from the likes of AmeraMex International, Inc. are also expected to create significant headwinds for the company.

We, currently, have a long-term Underperfrom rating on Ryder System. For the short term (1–3 months), the stock retains a Zacks #4 Rank (Sell).

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