M&A announcement

Jul 18, 2016

Good day, ladies and gentlemen, and welcome to Matson conference call to announce Matson Logistics acquisition of Span Alaska. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, today's program is being recorded. I would now like to turn the conference over to your host for today's program, Mr. Jerome Holland, Director of Investor Relations. Please go ahead. Thanks, Valerie. Matt Cox, President and Chief Executive Officer, and Joel Wine, Senior Vice President and Chief Financial Officer, are joining the call today. Slides from this presentation are available for download at our website, www.matson.com, under the Investor Relations tab. Before we begin, I would like to remind you that during the course of this call, we will make forward-looking statements within the meaning of the federal securities laws regarding expectations, predictions, projections, or future events. We believe that our expectations and assumptions are reasonable. We caution you to consider the risk factors that could cause actual results to differ materially from those in the forward-looking statements in the press release, the presentation slides, and this conference call. These factors are described in our press release and are more fully detailed under the caption Risk Factors on pages 8 to 15 of our 2015 Form 10-K, filed on February 26, 2016, and in our subsequent filings with the SEC. Please also note that the date of this conference call is July 18, 2016, and any forward-looking statements that we make today are based on assumptions as of this date. We undertake no obligation to update these forward-looking statements. With that, I will turn the call over to Matt. Thanks, Jerome, and thanks, everyone, for joining our call today. As you will have seen earlier today, we issued a press release announcing Matson Logistics acquisition of Span Alaska, which when closed, will significantly expand our asset-light logistics platform to include less than container load, or LCL, freight consolidation and forwarding to Alaska. This acquisition underscores Matson's long-term commitment to Alaska and our mission to move freight better than anyone. To begin, let me take you quickly through the transaction highlights. Under the terms of our agreement, Matson Logistics will acquire 100% of the equity in Span Alaska for a cash purchase price of $197.6 million. Matson will not be assuming any of Span's debt, and we expect the transaction to be treated as an asset purchase for federal tax purposes, which will allow for a tax basis step-up of assets worth an estimated $35 million of net present value benefit to Matson. Based on our current annual EBITDA run rate of approximately $20 million for Span, the enterprise value divided by EBITDA multiple for this transaction is approximately 9.4 times. Net of the estimated tax benefits related to the basis step-up, the transaction multiple would be approximately 7.7 times. We expect this acquisition to be immediately accretive to earnings, with annual EPS accretion expected to be approximately $0.10 to $0.12, excluding one-time transaction closing and integration costs of between $4 million and $5 million. Subject to HSR review and other customary conditions, we expect to close the acquisition in the third quarter of 2016 and plan to fund the closing from available borrowings under our $400 million revolving credit facility at closing. Today, we've also signed a commitment letter for a $200 million private placement of long-term fixed rate debt at an attractive rate, which will provide for the longer-term transaction financing, and Joel will go into more detail on that later in the call. Turning to slide 4, Span Alaska is a market-leading provider of LCL freight consolidation and forwarding services to Alaska. This is an asset-light logistics business that aggregates customers' freight in its Auburn, Washington facility for consolidation and shipment to Alaska. Once in Alaska, the freight flows through Span's network of terminals that provides access to all of the state's major population centers. As a complement to its core LCL services, Span also provides trucking services, which include drayage to and from the Port of Tacoma and delivery to customers' final destinations in Alaska. Lastly, Span has been a longstanding customer of what is now Matson's Alaska operation and today represents Matson's largest northbound freight customer. Slide 5 describes Span's product offerings in more detail, which include extensive capabilities for handling specialty freight like keep from freezing, freeze and chill, and hazardous cargo. Span also provides door-to-door pickup and delivery services to and from the Tacoma and Alaska ports for its customers, as well as partnering with an agent terminal in Chicago to originate LCL Midwest freight bound for Alaska. We think there will be opportunities to expand this type of operating in the lower 48 through our existing Matson Logistics sales force. Looking at the competitors on the right, Span is the largest LCL forwarder in the Alaska market. I'd also note that both Carlile and Lynden's forwarding operations are owned by parent companies that have ocean transportation assets, with TOTE owning Carlile and Alaska Marine Lines owning Lynden. With this acquisition, Matson will be essentially integrating into the forwarding market in a similar fashion to the two other primary incumbent Alaskan ocean transportation providers. In contrast, the Hawaii forwarding market is much more fragmented than Alaska, and none of ocean transportation asset owners own forwarding operations. To be clear, Matson has no intention of, nor would we be interested in, becoming a freight forwarder to Hawaii. Moving on to slide 6. The acquisition of Span Alaska fits solidly within the framework of our broader logistics acquisition and growth strategy. We look for niche businesses that provide value-added services, have a high level of customer service differentiation, allow for geographic and/or key product offering expansion, generate strong cash flows while complementing Matson's core businesses. Span Alaska checks every single one of those boxes. The acquisition significantly expands our asset-light platform and enhances Matson Logistics service offering to include value-added LCL freight consolidation and forwarding, further solidifying Matson's position as a critical freight transportation provider in the Alaska market, where customers demand reliability and high-quality customer service. We view Span as the leading operator in the space and have confidence in the experienced management team at Span and will continue to build on the leading brand and market position they've created in Alaska. As a result, Matson does not plan to make any changes to the existing operation, and the only area of planned integration of the business will be in financial accounting systems. Therefore, we view the integration risks of this business to be minor. With respect to synergies, we've not planned for much in the way of immediate synergies, given that the vast majority of Span's business is already carried on Matson's vessels. However, we do see some longer-term potential for sales synergies with Matson Logistics in the Lower 48, as we should have an improved freight identification and cargo handling capability. Given our shared values and focus on customer satisfaction, we expect the Span team to fit in well within Matson's culture and do not expect to make any headcount reductions. With that, I'd like to now turn the call over to Joel, who will run through the financial highlights of the transaction. Joel? Thank you, Matt. On slide seven, you can see some of the financial highlights of the Span business and the transaction. Over the last several decades, Span has developed a highly diversified customer base and in segments that are similar to Matson's, in that Span is more focused on the grocery and consumer staples segments of the Alaska freight market and less concentrated in the more volatile oil and gas areas. Span's margins are excellent for a freight forwarder, which is a result of their freight density and strong market share, as well as their highly efficient primary consolidation facility in Auburn, Washington, which is located not far from the Tacoma Port. The Auburn location is a traditional cross-dock facility with about 42,000 sq ft and 93 loading doors. Given its size and layout, the facility is well-equipped to handle the needs of the business during the peak busy season of July through October. On the deconsolidation side, Span has facilities in all the key geographic markets in Alaska, and additionally has the scale in these markets which allows for efficient revenue per container loading, which is another factor that also improves margins. Being asset light, Span's annual CapEx requirements are expected to only be approximately $1 million per year, which produces a high rate of free cash flow generation. We expect cash-on-cash returns for this acquisition to be in the mid to high single digits in the first few years, and the overall payback on the investment to be sometime within 10 to 15 years. Given these free cash flow characteristics, we expect this transaction to be a strong ROIC contributing acquisition for Matson over the long term. In the short term, we expect $0.10 to $0.12 per share in EPS accretion on an annual basis in the first year, excluding transaction and integration expenses. We also note that the business may likely trend lower in the next year or two, given the more challenging macro environment in Alaska due to lower energy prices. We baked this expectation into our valuation analysis as we negotiated the purchase price of this transaction. Turning to slides 8 and 9, the transaction will be funded from our bank revolver. We also announced today a $200 million financing at 3.14% for a 15-year final maturity, approximate 8.5-year weighted average life, senior unsecured private placement of debt. The covenants on the new debt are expected to be substantially similar to our existing covenants, and we expect to close this new debt transaction sometime in the next 60 days. We viewed today's all-in long-term borrowing costs to be attractive and felt it would be prudent to match this long-term investment with a similar amount of long-term debt. Turning to slide 10, you can see our pro forma cap table for the transactions announced today, in which our leverage ratio in the 1.8x to 1.9x range will still be below our long-term targeted level of in the low 2x. Our liquidity position will also remain strong, with only approximately $57 million of borrowings under our $400 million bank revolving line of credit, which does not mature until the year 2020. Overall, this strong liquidity and balance sheet position, along with the significant free cash flow generated by our core businesses, positions Matson well to fund our existing fleet renewal commitments, consider additional fleet investments, and also return capital to shareholders. With that, I'll turn the call back over to Matt for closing remarks. Thanks, Joel. In summary, this is a highly compelling transaction, both strategically and financially. It is in line with our history and focus on value creation and reinforces our commitment to Alaska over the long term. The transaction significantly enhances Matson Logistics' platform and profitability, providing near to medium-term EPS growth and broadens our service offering for customers. Additionally, we do not expect the transaction to impact our other strategic initiatives, like our Aloha Class new build vessel program, our consideration of additional fleet renewal investments, potentially new strategic growth investments or our current dividend and return of capital approach. With that, I will turn the call back to the operator and ask for your questions. Thank you. Ladies and gentlemen, if you would like to ask a question, please press star then one on your touchtone telephone. Again, if you would like to ask a question, please press star then one. One moment please for questions. Our first question comes from Jack Atkins of Stephens. Your line is open. Matt and Joel, good afternoon. Thanks for the time. Hi, Jack. So I guess just to sort of start off, Matt, could you maybe expand a little bit in terms of the one or two things that you see are sort of the core strategic benefits of the transaction, and then what are some of the major additive services that you're going to look at in terms of what you can scale and leverage across your existing logistics business over time, when you look at over the next three to five years? Yeah. Okay. Just let me break that into the parts in which you asked it. First, around the strategic rationale and the benefits. I really see it as twofold. One element of our benefit is that it further solidifies our position in the state of Alaska, allowing us to be one of the premier carriers. We obviously started off with the Horizon acquisition of that business. We followed on with some crane investments from new equipment. This acquisition of this asset, again, further solidifies our position in the transportation market. In some ways, puts us on equal footing with the other two ocean competitors in that market, but lets people know we're here to stay. It is based on our understanding and our belief that over the long term, this is a market which will be of significant value to Matson and our shareholders. I think the second thing it does for us is after a relatively long quiet period in our logistics segment, it signals that we remain interested in growing that segment. We want to do it with businesses that, as I mentioned, that are niche, value-added, that share Matson's high level of customer service and differentiation, and allows for geographic or key product offering expansions and also generate strong free cash flow generation. We do find that it, as I mentioned in my prepared remarks, achieves all those things. Those are the main two strategic benefits. Again, solidifying our position in Alaska and providing earnings growth catalyst to an important subsidiary, Matson Logistics. So that's where I see that, the reason behind the strategy behind it. Then to your second question about where it takes us over the next three to five years. All I can say is that, again, we tend to be very disciplined in underwriting our businesses. We're well-positioned, I think, in Hawaii. We're improving our strategic positioning in Alaska. We feel like we're in great shape with our ports and terminal investments with where we are in Guam. We all know that China is in a tough spot now, but we feel extremely well-positioned there with our highly differentiated expedited model. We feel really good about our positioning, with the main earnings drag, as we've talked about in earlier calls, being the very difficult circumstances in the China market. Okay, Matt. That's helpful. Then when I think about from a customer perspective, can you maybe walk us through the rationale for going through an intermediary, a freight forwarder like a Span versus going directly to a Matson? Are those two different types of customers? I'm just curious, since Span already did a good chunk of business with Matson, just what are the differentiations, I guess, between a customer who would do business directly with you all versus a freight forwarder in the past? Yeah. So the markets have some overlap, Jack, and in some ways are different. The largest differentiator is typically just the volume that the customer is going to be shipping. If they're going to be shipping a pallet or two of a product, smaller size, they would do better using one of the forwarders in the Alaska market, very similar to the Hawaii market. If you're a larger volume shipper, you don't really have a need for an intermediary like a forwarder, nor is there much benefit for you in doing so. That continues to be the primary differentiator. Although I would say, both in the Hawaii market and in the Alaska market here, we also see customers who are using full container loads of cargo shipping on Matson who have a small amount of overflow and decide they don't want to pay for another full container because they, let's say, have overflow of a pallet or two, would provide it to a forwarder who then can consolidate it with other cargo and provide them a lower transportation cost than using that last container largely empty. So those are some of the reasons, and you saw some of the names of the customers there. They're a great group of customers that they've developed very deep relationships over a long period of time, the Span Alaska folks. Okay. So that makes sense. You're not then concerned, I guess, when you think about the customer base perhaps being cannibalized and just going directly to Matson. It just seems like they're two different types of customers there. Perhaps that's why this less-than-container load service, I guess, is so important. It seems like that's a very large component of Span's business. It is, and the other forwarders, candidly, in the market. That is the primary differentiator. There is no cannibalization of our existing business. Customers will use forwarders for reasons that make sense to them, and we do not see that changing. Okay, great. Last question from me. When you break down these three major services between less-than-container load and container services, truck, and then other logistics services, how do you sort of roughly break that down from a revenue perspective? Jack, it is Joel. We are not going to provide the detail or disclose the detail on that. It is beyond the level of materiality, if you will. But the majority of the business is the core LCL freight. I would say that. Okay. All right. Thanks for the time. Thanks, Jack. Thanks, Jack. Thank you. Our next question comes from Ben Nolan of Stifel. Your line is open. Great. Thanks. Looks like a good deal. I have a couple questions. I hope that's okay. My first question has to do with just how to think about this. I know that, Matt, you mentioned you've been pretty quiet on the acquisition front or the consolidation front with respect to the logistics business for quite a while now. As such, this is obviously a pretty meaningful step out in that direction. First of all, do you see many more of these type of consolidation opportunities out there? Is there much to be done? Secondly, now that you have this under your belt, does it make sense to roll in more similar operations like this? Is there any scale to be had associated with this acquisition in particular, and other similar bolt-ons? Ben, it's Joel. I'll take that. I think the core of your question is around additional deals like this and add-on growth. I'd say Span, first of all, is a very unique company. They are our largest customer in the Alaska business, and this was a very complementary fit to what we bought last year and allows us, we think, long term, better able to compete up in the Alaska market. There are other forwarders in the Alaska market, so there could be similar types of transactions in this one niche area. Then more broadly, outside the Alaska geography, we now have a forwarding business. Matt mentioned earlier, we're not going to go into forwarding in Hawaii, but we'll have the capabilities, and we could do forwarding in other niche segments if we think that those we could leverage off this forwarding business in the other geographies where there's good margin and have the defensible characteristics and cash flow-generating characteristics we like to see, then those could be potential things as well. We've always had a very strong brokerage business. Now we've got a strong forwarding business and capabilities in that area as well. That's another area that we think we can compete in long term in logistics. Okay. That's helpful. Actually, Joel, while I have you, this is just sort of for modeling purposes. You guys have that $35 million tax impact. How should we think about the timing of that coming through to the bottom line? It'll happen over 20 years. Okay. So essentially, the transaction will be treated like an asset purchase. The intangibles and goodwill will be deductible from a tax perspective over a longer period of time. So it will be a little bit of savings every year for quite a bit of time. Okay. Getting back to the business itself, Matt, you had mentioned that, I think it was you, that, I suppose, the momentum of the business or the trajectory of the business getting a little bit softer given the oil and gas business in Alaska. Was curious if it might be possible to sort of put a little bit more context around that to the extent maybe that the trailing 12 months EBITDA was $21 million. How should we think about the volatility or the susceptibility of that EBITDA to the oil markets or the Alaskan economy? Yeah, Ben, that is a good question. As you have noted in our own discussion around the recent purchase that Matson made of the Horizon business, we see the environment as muted. We would also note, like the Horizon Lines business, that Span Alaska did not, and Joel mentioned this in his prepared remarks, was not a significant player themselves in these oilfield services markets. We see those as more significantly down, those that are focused on the oilfield service. Our business, that is Matson's ocean business, had been less impacted, muted. But we took a conservative approach here, saying that the Alaskan economy will remain muted to slightly down in a low energy environment. So we underwrote our purchase not on current run rate or pro forma EBITDA, but rather on just entering a period where the macro is going to be more muted. So we underwrote it on that basis. So I guess we are hopeful for a turnaround in the Alaska economy, but we did not bet on it, both either in our prospects for earnings over the next few years, nor in underwriting the transaction at the price that we paid. I guess that is the best way that I think about it. Okay. Maybe I can think of that in a different way. $21 million is the pro forma number. Any idea what it was when things were really blowing and going, and they were kind of on top of the world? Well, let me give a little backdrop then. It is embedded in our slide materials here, but it is important to call out that Span purchased a company last year called Pacific Alaska Freightways. That deal closed in September of last year, 2015. It was a very similar-sized company to Span Alaska. You essentially had two companies come together in a doubling of size. The $21 million run rate number right now is what the business is actually doing. The LTM actually would be a little bit higher, but giving into effect of a full year of operations of PAF and a full year of the benefit of the closures of the former PAF facilities, because they are essentially running all the former PAF business through Span's facilities, and there has been some hard dollar cost savings from that. All that is baked into the $21 million number. Does that make sense? Yeah, for sure. The last one from me, and I will turn it over to you guys have been pretty generous. I am just trying to think about maybe how sticky this business is or how big of a moat it is. How much market share can normally toggle between operators, or effectively maybe how competitive is the market landscape here, if you can maybe characterize that? Yeah. This is Pat. I can touch on that. What we found with Span's business was, first of all, that they, like Matson and like Matson in Alaska, had developed decades and multi-decade long relationships with their customers. These relationships are very sticky. They are very stable. They are very service-oriented. One of the reasons why, and we just touched on this, but there is a significant cultural impact, or similarity between Matson, and we have already talked about between Matson and our ocean business in Alaska, but a very similar philosophy we have seen with Span Alaska. I would also note that the freight forwarder market, as you have seen in the materials, there are a number of longstanding players also that have significant relationships with their customers that again, are multi-decade. So at least the way I think about it, the growth in earnings is more likely to be based on the macroeconomy rather than a dramatic or significant shift in the share and the trade. I think that is the way you should think about it, which is the way we have thought about it in the process. Okay. Great. That does it for me. I am looking forward to my Alaska trip. We will have to set something up. All right. Thanks, Stan. All right. Thank you. Our next question comes from Kevin Sterling of BB&T Capital Markets. Your line is open. Good afternoon, guys. It's actually William Horner on for Kevin. Hi, William. Hi, William. Hey, Matt and Joel, I appreciate the color y'all have given so far. Just going back, if we could, to your expectation for the business to sort of trend lower over the next year or two based on the challenging market conditions in Alaska, which we clearly understand. But in terms of the LTM pro forma guidance y'all gave, or the EBITDA figures y'all gave, just trying to get a sense of the magnitude, relative to that number, where you may think things may trend going forward. William, I appreciate you asking that, but we're not going to comment on that. What we're trying to do is signal, first of all, what's the run rate today, and then what are our expectations as we look forward to the next couple of years, given that we're a big player in the Alaska freight market, and we do see a softening freight environment there given the macro. What we'll do from a formal outlook perspective is just like we did last year with the Horizon deal. When this deal closes, then we'll officially update our outlook for this year because we give outlook on an annual basis. When it closes, we'll update our outlook for the logistics business of Matson because this is the segment it'll fit in. Then when we get to our 2017 outlook, we'll give a full year outlook of logistics, including a full year of these Span operations as a part of that. That's how we'll do it because that's how we do our outlook. But what we're saying is that we do expect the business to trend a little bit lower during this period of time given the freight environment, but you'll have to interpret the rest yourself. No, that's fair, Joel, and I appreciate that. I'm not meaning to cross a line by asking that. I guess maybe asking it in a different way, the EPS guidance you're giving, the accretion of the $0.10-$0.12, is that baking in sort of the lower trends that you're forecasting? Yes, it is. Okay. That's fair. Thank you. On the CapEx, I know you said asset light, it's pretty limited CapEx of about $1 million for a year. Is this largely for container assets? Can you kind of help us frame what this dollar figure is going into? Yes, the company does own some containers and trucks. They lease both as well, but they own both, and they also have some IT spending, which gives rise to capitalized expenses as well. So those are the primary areas. Okay. It is fair to assume that based on the CapEx outlook, Matson probably does not need a whole lot of additional equipment to support Span now coming under the Matson Logistics umbrella. That is correct. Again, with only a $1 million CapEx budget as well as some leasing, Span was not spending a ton of money in these areas anyway. Span felt it was important to get their brand on some of their boxes, which is good from a branding perspective up in Alaska. They did a nice job with that, and we will continue to do that because we want the Span business and the Span Alaska brand to continue to be front and center in the marketplace. We really do not envision any change in all of that. Okay. That is fair. Going into the customer relationship you all have had with them for the past 30 years, it is safe to assume that they were not exclusively using Matson as their service provider. How does this impact Span's relationship with other providers in the space? William, this is Matt. As you rightly pointed out, we have had a multi-decade relationship with them. We have called out that a large percentage or a significant part of their business is run through Matson, but they use other transportation providers as well, to a lesser extent. Our vision at this point is that that would not change, that they would continue to use other operators as their business model saw fit. They are going to be run as an independent business, and they will be making their own judgments about how and when to use carriers. As an example, there might be some bit of freight that is time insensitive, that is very price sensitive, that they may want to use a barge operator, and they are going to be free to do that and continue to operate independently. Okay. Matt, that's good color. I appreciate it. Most of my questions have already been asked. I'll leave it there. Okay. Thanks, William. Thank you. Thanks. Thank you. Our next question comes from Michael Webber of Wells Fargo. Your line is open. Hey, good afternoon, guys. How are you? Hi, Mike. Hey, just wanted to dig in quickly to Joel, within your answer, I think, to Ben Nolan's question or someone's question around the $21 million of pro forma EBITDA. Just to make sure I am correct about this, you said that effectively includes some of the efficiency gains for the recently merged entity? Yes, because we are saying that is the current run rate literally right now. So they bought PAF last year in September. They were successful in integrating that and effectively completed the integration in the early part of this year. Okay. They've been running integrated operations now for a number of months. We obviously spent a lot of time on that in due diligence. They've proven out their cost savings, and they're running the operations through the existing Span facilities. It's very much their run rate right now. All right, good. Just to sort of a firm basis. If I just look at the guidance and I kind of back out an EBITDA figure, it looks like the business is softer 20%-25% year-on-year. That would imply, I guess, 10, 8, 11x EBITDA multiple. I guess my question is, one, is that reasonable? That's simply just kind of backing out the income tax effect and again, adding in some interest. Two, how does that multiple on a forward basis compare to last done in that space, which would have been the merger that happened a year ago between these two companies? The 20% or 25% number, I didn't catch which one or both of those numbers you threw out. No, that's not right. Either. It's in the range. No, that's not what we're saying. You're trying to build out from EPS or something, I assume. Yes. Yep. There's a whole lot of assumptions around the purchase accounting. On the accounting side, Mike, all the assets will be marked up to market of the $197.6 purchase price. That'll include customer intangibles and goodwill and the amortization that comes from all that. In our EPS numbers, we're baking in all of what we think the final purchase accounting will be. You're not going to build it back into The way you did it is not going to give you an answer that you can hang your hat on with respect to any kind of decline in the business. What was the second part of your question? Well, I used that to back out a multiple that was closer to kind of 10x to 11x. Multiple. But even within the context of the multiple you just paid, how does that compare to last done within this space? Yeah. I am trying to get a sense of where valuations really are here, because this is north of what your consolidated businesses are trading at today. Yeah. It is a 9.4x multiple, and we are telling you that is the current run rate. So if there is a decline, it is going to be a year to two out. And so we are very comfortable this is a 9.4x multiple and 7.7x after the tax benefit. A lot of transactions here are generally between 8x and 12x. The previous acquisitions of Span Alaska Transportation is a confidential number. We are not disclosing that. What I would also say, though, relative to our existing business, this is a lower multiple when you look at EBITDA minus CapEx. We said $21 million of EBITDA, one of CapEx, you are talking about 20. So 10x EBITDA minus CapEx. 6.5 which we think is very, very attractive. Yeah. Okay. Just maybe just thinking about kind of the rationale behind this, and aside from the fact that it makes you more similar to other players there, it seems as though Span is relatively captive, right? If you've got some of your major competitors up there having issues in other lanes, you're their biggest customer. Was there a risk that you could see further consolidation there, where you guys would get kind of squeezed and have to come up with another solution? I'm just trying to think about the impetus around this, but I get the fact that it's accretive and I'm not sure where it falls relative to the hurdle rate and what else you were looking at. Was there any other kind of competitive dynamic up there that drove the investment decision partially? Mike, this is Matt. I would say no. I would say it really was on the basis of looking for ways to continue to expand our footprint in a market that we want to be in long term. The fact that this is really a terrific business with terrific management. In some ways, I believe the fact that there was a macro uncertainty about the economy allowed us to acquire an absolutely terrific business at a fair price with compelling sets of financial economics. Those were the things that drove our decision. The issues around they Span using Matson a lot, those really weren't factors. It remained clear to us that their own service model required very fast and reliable underlying ocean transportation for them to achieve their own business mission gave us confidence that we would continue to be a customer of theirs, regardless of who owned that asset. For us, it was a great opportunity, and again achieved the two multiples that we said, which was to put us in a better position in the overall Alaska market and also provide an uplift in our Matson Logistics business, for which we've been growing quietly organically, but also looking for terrific businesses to acquire at fair prices. Those were really the considerations that drove us to make this decision. Okay. Fair enough. I think that's it for me, but I appreciate the time, guys. Thanks. Okay, thanks, Mike. Thank you. Our next question comes from Ian Zaffino of Oppenheimer. Your line is open. Hi, this is Dan Zappulli for Ian. Thank you for giving me the opportunity to ask a question on this. Look, in terms of the underwriting of this versus oil and the Alaska business, maybe you could just, not necessarily a specific energy outlook, but clearly oil price has improved to the mid-40s right now. Have you used those assumptions going forward to really add more to the Alaskan business? Or is energy not such a large component of the pro forma overall transaction that the energy wasn't as relevant? If you could just give a little background to that'd be helpful. Thank you. Sure. Yeah, no problem, Dan. I guess for us, as it relates to the Alaska business, as I mentioned earlier, both Horizon Lines, now Matson's Alaska business, and Span had not traditionally catered as much into the energy sectors, which can be more volatile. Right. It is clear that the Alaska economy is facing headwinds related to the lower energy prices. What exact level of energy prices triggers a rebound in the Alaska energy market as opposed to other segments around the world of energy markets, I can't say. But it's a feeling that it's something north of where we find ourselves today, and that is that energy prices would need to rise further from their current levels before we see a significant rebound in that segment in Alaska. Whether it's $65 or some other number, that I can't be precise about. But what I do know is the expectation in the state right now is that prices need to rise further before there's a change in environment, which is the best I can give you. Got it. Okay. Excellent. Thank you very much. Okay. Thanks, Dan. Thank you. I'm showing no further questions at this time. I'd like to turn the conference back over to Matt Cox for any closing remarks. Okay. Well, thanks everyone for your attention today. We look forward to catching up with everyone on the first week of August when we announce our second quarter results. Aloha. Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a wonderful day.