67 WALL STREET, New York - September 21, 2012 - The Wall Street Transcript has just published its Transportation and Logistics Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: FMCSA CSA Regulations - Regulatory Issues in the Trucking Industry - Trucking Pricing & Capacity Dynamics - Retail and Industrial Transportation Demand - Truckload, LTL, Parcel, Rail and Intermodal - Capacity Constraints Result in Pricing Power
Companies include: Matson Inc. (MATX) and many others.
In the following excerpt from the Transportation and Logistics Report, the CEO and the CFO of Matson Inc. discuss the outlook for their company for investors:
TWST: Until recently, Matson was part of Alexander & Baldwin. Please start by talking a bit about the history of the company and what led to the decision to spin off Matson as a separate company.
Mr. Wine: The history of the overall separation goes back a long time, actually. I would say, for many, many years, the company, the board and outside investors had all asked the question from time to time: "Should these various businesses still be held together as one conglomerate, or might the businesses do better and value be created by separating certain pieces?"
So it was something that had been discussed. And the board had done a pretty rigorous job of analyzing it every two or three years for quite some time. And by quite some time, I mean over 10 years, let's call it from 2002 to 2012. But even before 2002, it had been explored and discussed.
And so the question became, How could the businesses perform better, either together or separate? Ten years ago, the answer was together. There were financial synergies of keeping the businesses together. There was also some benefit of being a big, important company in Hawaii - doing more business as a conglomerated entity across multiple industries in Hawaii really benefited the company well over many decades.
But I would say what changed over the last 10 years primarily was on the real estate side of the business, where through the business really being successful and growing and creating profits and cash flow, that business grew, particularly its steady income-producing commercial portfolio of real estate assets, which complemented well, and in many ways funded the large investments required on the real-estate-development side. That business 10 years ago was still growing, was not steady in predictable cash flow, and it was questionable whether that business really could be big enough and substantial enough and diversified enough to be the anchor business of a successful publicly traded company.
On the Matson side, I think there was less question of that. There was a clear view that Matson was big enough and had a long enough history and predictable businesses and strength in its core markets to be a standalone independent company. It was really a question of, Could real estate get big enough and diversified enough for that to make sense?
And so at some point, in 2006, 2007, 2008, somewhere in there, it's debatable that the real estate business did get big enough on its own. Then, of course, in 2008 the financial crisis came, 2009 was a very depressed recessionary-type environment for most businesses and A&B's businesses fit that category.
And then 2010 was actually an investing year. There were big investments happening on the real estate side and on the Matson side, where there wasn't really a clear window of 12 or 18 months of clear operating performance, where there were just too many variables in the air with respect to our businesses.
So it really wasn't until 2011 that the dust settled in all those different variables, and the board came to the conclusion that the businesses could operate and execute better independently. There was also a relatively clear 12-, 18-, 24-month period of stability where the board felt comfortable making that kind of important strategic decision, where there wasn't something looming that was still uncertain or a variable that was going to create a lot of uncertainty with respect to executing a separation transaction. So that is the history, but the bottom line is that the determination came from the view that the businesses could operate better and perform better over time independently.
TWST: Is there anything you'd like to add?
Mr. Cox: I would add some historical context. Matson, this year, will celebrate its 130th birthday, so we've been around a very long time. Alexander & Baldwin is 140 years old, and Matson had been owned in part or in whole by A&B for over 108 years. So these are fairly historic businesses that have long been operating in Hawaii, many, many years, even before Hawaii became part of the United States, and so each of the businesses have celebrated very long histories.
The other point I would make is that Alexander & Baldwin always ran Matson as an independent business, such that we, the Matson group, had its own finance, legal, information technology, accounting, insurance. They operated us much like a portfolio company, and so the separation, while momentous from a historic point of view, from an operational perspective was a fairly straightforward matter. For example, we have only had to hire five or six people at the Matson level in order to operate as an independent company, which is very small relative to our overall headcount. So in some ways, because of A&B's operating approach, Matson has been running autonomously for many, many years.
TWST: Please discuss the focus and scope of Matson's operations today, and whether there will be any changes to its business strategy now that the company is its own publicly traded entity.
For more from this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers, and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.