MONTREAL, Que. — Don’t expect any major acquisitions from TransForce during the first half of 2016. Alain Bedard, chairman and CEO of Canada’s largest trucking firm, says buying back TransForce shares is the best deal going.
Addressing analysts and business press on an earnings call this morning, Bedard said TransForce will buy back and eliminate about 10% of its outstanding shares, which are currently trading at about 6x EBITDA – a bargain, according to Bedard.
“We’re not buying something that’s unknown,” Bedard said. “If you are doing a truckload deal, there’s always a risk.”
Later in 2016, however, TransForce could make a move to bolster its US truckload segment.
Bedard said TransForce will also close unprofitable LTL terminals in Canada this year and focus on areas with stronger margins. The company recently sold its Kamloops terminal and others could be shuttered as well.
“Kamloops was great 20 years ago,” Bedard said. “Nowadays, with the competition we have and the depressed market, it doesn’t make sense to be there. We have other markets where it doesn’t make sense to be there so that’s going to be part of our 2016 plan, to focus on high-density areas where we can make a difference with our technology and our service.”
TransForce’s LTL business is what keeps Bedard up at night, he admitted, particularly in hard-hit Western Canada.
“The situation in Alberta is terrible. It’s terrible and it’s going to get worse,” Bedard said. “I think that it has already spread to Ontario and the rest of Canada. The Canadian consumer is depressed…Our LTL market is terrible because Alberta was our best market until a year ago and now it’s our worst market. We’re down 25% in volume there and it’s going to get worse. Calgary is like a ghost town now.”
Western Canada contributes only 16% of TransForce’s revenue, Bedard pointed out.
He is more bullish on the company’s US truckload and package and courier businesses. He said US consumer spending is still strong.
“I’m still convinced that sometime, maybe late in 2016, there will be some kind of a combination between us and somebody else that is going to create a stronger, great truckload (business) in the US,” Bedard said.
TransForce has the cash, having recently sold off its waste management business, though much of that will go towards buying back its own shares. Bedard said the waste management sale was a good one for everyone involved.
“A lot of people were laughing at me when I bought the company in 2005,” he said. “We generated a profit of over $500 million with these transactions. We built a great business, we had a solid team and we sold it at a fair price to GFL and we made a huge gain and the buyer is happy because he bought a tremendous company.”
TransForce filed its fourth quarter and year-end results Thursday.