MONTREAL, Que. — Canada’s largest trucking firm, TransForce, has made a friendly, board-approved takeover bid for Contrans, another of Canada’s largest, publicly traded trucking firms.
The proposed deal was for $14.60 per share, totaling an equity purchase price of about $495 million.
The deal has the support of Contrans’ Board of Directors.
“I have admired the progress of Contrans for some time,” said TransForce chairman, president and CEO Alain Bedard. “Contrans has a culture similar to that of TransForce, strategically acquiring companies that add value for its shareholders. Contrans has a history of profitability, is financially sound and has seen steady growth over the years. From transportation facilities located mostly in Canada, Contrans offers customers a wide array of specialized services. This acquisition provides exciting potential for TransForce, adding strong resources, an excellent client base, and importantly, very strong management.”
Stan Dunford, chairman and CEO of Contrans, added “TransForce has a significant market presence that will benefit our operations and possesses many of the same values that have allowed Contrans to operate successfully. I believe the entrepreneurial culture of Contrans will fit in well with TransForce. I am proud of Contrans’ management’s accomplishments over the past 25 years and look forward to seeing the team continue to flourish as part of the TransForce organization.”
The deal is expected to commence on or about Aug. 21. TransForce says it will nominate Dunford for election to its Board of Directors.
Reached Thursday night for reaction, Mike McCarron, who heads Wheels Group’s M&A, had this to say about the deal:
“TFI’s purchase of Contrans is further evidence that the race to consolidate the aging Canadian trucking industry by its biggest players is heating up. The smart operators understand that the scale they will need to survive in the future can’t come from organic growth, but must be bought. I expect the recent Vitran and Contrans deals will trigger more deals in the slow-moving mid-market as more and more baby boomers will take advantage of their strong balance sheets and get out while they can. The landscape of the Canadian trucking industry is going to look a lot different five years from now.”
Doug Nix of Corporate Finance Associates told Trucknews.com his firm had heard rumblings of a deal and felt it was a strong strategic fit. This is how he broke down the deal:
“Contrans’ strategy was to build a specialty carrier operation, but without looking south to the USA, it would be hard to grow beyond where they were. So unless Stan (Dunford) and Greg (Rumble) were going to change strategy, selling is the best option. We think it is a very good move on TFI’s part and it makes good sense for the Contrans shareholders, without the strategy change. I complement Alain (Bedard), Stan and Greg on putting this together. The consolidation of the two companies will create a vacuum in the large company space in the Canadian market which at some point will be filled by foreign competitors. It will also create space and demand for new Canadian publicly traded transportation companies. It will be interesting to see how this ripples through the industry and how it impacts valuations.”
Mark Borkowski, president of Mercantile Mergers and Acquisitions Corporation, noted the transaction is indicative of widespread consolidation and suggested scale is needed to survive.
“The TFI bid for Contrans is proof of a major transportation consolidation that is taking place in the North American market. The deals are getting bigger. The market has become so competitive that only the big will thrive and survive.”
RBC Capital Markets, in a report issued by analyst Walter Spracklin, also found the deal to be a good one for TransForce:
“In our view, this deal is compelling from a strategic perspective as we consider (Contrans) to be a best-in-class truckload operator with a strong position in niche markets. Accordingly, we believe TFI stands to gain a competitive edge in TL markets across Canada. From an operating point of view, this transaction offers density and scale in the North America truckload market when combining CSS with TFI’s existing business and Transport America. While integration synergies are not typical in TL acquisitions, we nevertheless expect upside from added scale and the powerful operating expertise of the combined entity.”
As of the latest Top Tier report on Canadian carrier capacity, published by Motortruck Fleet Executive earlier this year, Contrans companies collectively operated: 39 straight trucks, 1,493 tractors and 2,541 trailers. Impressive, but still paling in comparison to TransForce’s: 3,288 straight trucks, 3,774 tractors, and 12,486 trailers.
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