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Competition Watch (January 01, 2007)

MULLEN GROUP INCOME FUND, TRANSFORCE INCOME FUND, CONTRANS INCOME FUND and UTi WORLDWIDE INC. were the most active acquirers in 2006, each with four announced transactions. In total there were 135 US ...


MULLEN GROUP INCOME FUND, TRANSFORCE INCOME FUND, CONTRANS INCOME FUND and UTi WORLDWIDE INC. were the most active acquirers in 2006, each with four announced transactions. In total there were 135 US or Canadian transportation M&A transactions last year, according to a count by BMO Capital Markets. Almost half (48%) of those transactions took place in the logistics sector (defined as asset-light transportation and warehousing) and a bit more than half (27%) in the TL sector.

“Overall, M&A activity continued at a brisk pace, driven by a surge in private-equity backed transactions. Beyond their continuing interest in asset-light firms, this year we saw private equity firms begin to invest in asset-heavy firms as well,” BMO Capital Markets commented in its January report.

Consolidation continues in the LTL sector, BMO comments, with large firms snapping up smaller ones in an effort to extend their geographic coverage coast-to-coast. The TL sector saw less activity (in terms of dollar value) but BMO comments that there is continued strong demand for brokerage and freight forwarding firms in the logistics sector. It adds that despite the political issues raised by the DP Ports transaction in the US, infrastructure assets (including ports) “continue to be hot commodities.”

TRANSFORCE INCOME FUND has wrapped up its acquisition of Westfreight Systems and Westfreight Holdings, a carrier specializing in over-dimensional and heavy-haul transportation services. Westfreight is also a player in the LTL and TL van and flatbed industries. The carrier primarily services the oil and gas industry with lanes between Alberta, Texas and Oklahoma.

The company generates annual revenues of about $47 million hauling oilfield equipment. TransForce officials say the acquisition helps extend TransForce’s existing capabilities offered through UTL Transportation Services in the heavy-haul and full load segment of the energy sector. The move will also complement the cross-border LTL service provided to the energy sector by Canadian Freightways, TransForce officials add.

Lance Griffin, president of Westfreight Systems, will remain onboard and continue to lead the company.

MULLEN GROUP INCOME FUND‘s Pat Powell has tendered his resignation as co-CEO of the fund, but will remain as a director of the group. Powell joined the Mullen Group concurrent with the fund’s June 2006 merger with Producers Oilfield Services, where he held the positions of chairman of the board and president. Powell’s responsibilities will immediately be assumed by Murray K. Mullen, chairman, and Stephen H. Lockwood, co-CEO and president.

CLARKE is increasing its investment in oil and gas operations. A recent transaction by Clarke has made the Eastern-based transportation company the largest shareholder of Midlake Oil and Gas. Clarke acquired $14,100,000 of convertible preferred shares of Midlake bringing its total holdings in Midlake to approximately 44% of the total company’s outstanding shares. This recent financing, of which Clarke was the lead investor, was principally completed to fund a joint venture project with EnCana.

Midlake, located in Calgary, was founded in March 2006 to focus on the strategic acquisition and subsequent development and/or enhancement of lower risk resource properties with proven oil and gas reserves.

Clarke has proposed two representatives to be added to the Midlake board of directors: Melinda Lee, vice-president, investments of Clarke; and Bob Roth, president of Arkoma, a private Dallas-based oil and gas company with operations primarily in Canada.

The ST. LAWRENCE SEAWAY closed the book on its longest ever season on Dec. 30, with more than 48 million tonnes of cargo being transported through the seaway over 283 days. That’s a 10% tonnage increase over 2005.

Richard Corfe, president and CEO of the St. Lawrence Seaway Management Corporation, attributed the solid year in part to the company’s Hwy H20 campaign, which was launched with the intent of moving freight from the highways to the seaway.

“Our market development efforts, centred on the Hwy H2O campaign, brought in over 500,000 tonnes of new cargo movements over the course of 2006, adding over $1.2 million in incremental revenue to our top line,” said Corfe. “As these results represent an approximate 100% year-over-year increase in the volume of new cargoes coming into our system, momentum is clearly on our side”.

Corfe added the Seaway can accommodate a further 60% increase in cargo volumes, and claimed “Hwy H20 will play a key role as a complement to heavily-congested road and rail links within the intermodal cargo network.”


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