UPDATED: Manitoulin steps aside, TransForce wins Vitran deal

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TORONTO, Ont. — Vitran Corp. has terminated its agreement with Manitoulin Transport and will instead be acquired by TransForce.

TransForce offered $6.50 per share on Dec. 20, which Vitran said constituted a “superior offer” to the deal it initially entered into with Manitoulin that would’ve seen the Canadian LTL firm acquired for $6 per share.

Manitoulin will receive US$4 million in termination fees after waiving its right to match the TransForce offer. TransForce, for its part, will pay about $136 million for Vitran, including the assumption of its $29 million in debt. TransForce’s offer of $6.50 per share represents an 11.6% premium over Vitran’s closing price on Dec. 9 and a 41.38% premium over its closing price on Sept. 20, the day before Vitran announced the sale of its US operations.

“We are delighted to have reached agreement with Vitran for what represents the acquisition of an important strategic asset for TransForce with considerable synergistic benefits in the near term and into the future,” announced Alain Bedard, chairman and CEO of TransForce. “We are looking forward to leveraging the strengths of both companies to enhance our service offering for our customers and welcoming the Vitran employees to the TransForce team.”

Walter Spracklin, an analyst with RBC Capital Markets and Erin Lytollis, an associate with the same firm, pointed out that Transforce’s TL and TL operations currently generate combined revenue of $1.2B and expect the company’s recent acquisition of Clarke Transport and Clarke Road Transport to lift traditional trucking revenues by $190M  (15%) in 2014. Transforce’s bid to acquire Vitran’s Canadian LTL operations positions the company  to increase LTL and TL revenues by a total of almost $400M (30%) next year, they said.

“In this context, Transforce is poised to materially enhance its share of the Canadian traditional trucking market, which aligns with management’s strategic objective of consolidating this industry,” Spracklin and Lytolis said.

They added that the full offer price is justified, calculating that Transforce’s bid equates to 9.5x trailing EV/EBITDA, which they considered to be a “full offer at the high-end of recent transactions.”

“We believe the premium multiple is justified by Transforce’s  opportunity to improve pricing power in the LTL segment by further consolidating the Canadian market. In addition, we believe management would be able to extract synergy from this transaction by improving the operating efficiency of Vitran’s operations,” Sprackin and Lytolis said.

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  • Acquisitions like this are very concerning to me as an independent. Transforce has been allowed to buy up its competition and any other company at will almost as if to corner the market. Is this not supposed to be free enterprise? Everyone should have a fair shot regardless.The little guy is getting slowly squeezed out by larger corps, the insurance industry, and ridiculous and sensuous regulations based on data that is severely flawed and implemented for political motives more than public safety
    I proud of what I do and how I do it and I guess I’ll keep going until they shoot me down. Almost 30 yrs safe driving and I’m a high risk to insure on a independent basis , figure than one out. Just an example of what we’ re up against
    Chin up! keep on truckin!

  • Steve. I assumed when I first read your comment that it was a typo when you said “sensuous regulations”, but upon rereading it I like it like that, whether you meant to or not. We are certainly being subjected to new rules because they are sensuous (as in sexy) and are good for vote getting, not because they make sense and improve safety!!

  • I agree Brad. As an Edmonton owner operator with Vitran who used to be with manitoulin, I am relieved that transforce won. I have seen first hand what they do to the companies that they acquire. People become numbers and drivers become disposable. No-one has any value at manitoulin. Everyone is replaceable and you get treated as such.