LaserShip Is Buying Package Carrier OnTrac in a $1.3 Billion Deal

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Fast-growing parcel carrier LaserShip Inc. agreed to buy Western U.S. rival OnTrac Logistics Inc. in an approximately $1.3 billion deal aimed at extending the regional last-mile delivery specialist’s reach across a wider swath of the U.S. at a time of surging e-commerce demand.

The transaction is expected to close at the end of October and would create a network allowing two-day shipping to 74% of the U.S. population, LaserShip Chief Commercial Officer

Josh Dinneen

said.

The combined entity would have over 100 sorting and delivery hubs in 30 states and the District of Columbia, getting LaserShip closer to offering “a coast-to-coast solution which doesn’t exist outside

UPS

or

FedEx,

” Mr. Dinneen said.

The acquisition will be financed with incremental term loans totaling $875 million and $472 million in cash equity, according to an Oct. 6 release by credit-ratings firm

Moody’s Investors Service.

Mr. Dinneen declined to comment on the purchase price of the transaction, which Business Insider reported earlier. A spokesman for OnTrac declined to comment.

Vienna, Va.-based LaserShip and other regional package carriers are pushing into new coverage areas while shippers jockey for parcel capacity. Meanwhile, delivery giants United Parcel Service Inc. and FedEx Corp. are raising rates at the fastest pace in nearly a decade.

LaserShip and Chandler, Ariz.-based OnTrac would operate separately through the holiday shipping peak. The integration would take place in 2022, when the company is planning “aggressive expansion,” filling in major metropolitan areas in the Midwest such as Chicago as well as pushing into Texas and elsewhere, Mr. Dinneen said.

Acquiring smaller regional operators in those markets could help LaserShip grow faster than building capacity on its own, given the tight labor market, said

Satish Jindel,

president of ShipMatrix Inc., which analyzes parcel-shipping data.

“LaserShip’s acquisition of OnTrac is a transformative step to becoming a national last-mile delivery company by combining the eastern and western regional networks of LaserShip and OnTrac, respectively,” Moody’s said in its assessment.

The acquisition would give LaserShip a bicoastal network and revenue above $1.6 billion, the credit-ratings firm said. That “makes it a sizable regional parcel delivery company but still significantly smaller than national deliverers UPS and FedEx,” Moody’s said, adding it “remains to be seen whether the company can service all of its customers at the required service levels and sustain network efficiencies over the long-term as the company continues to scale.”

Write to Jennifer Smith at jennifer.smith@wsj.com

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