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Trimac sells Rentway to focus on bulk hauls, logistics

CALGARY, Alta. - Trimac has announced plans to sell off everything but its bulk trucking and third party logistics businesses so it can pay off debt and put itself in better shape to acquire more bulk...

ON THE BLOCK: Rentway is being sold to Penske.
ON THE BLOCK: Rentway is being sold to Penske.

CALGARY, Alta. – Trimac has announced plans to sell off everything but its bulk trucking and third party logistics businesses so it can pay off debt and put itself in better shape to acquire more bulk fleets.

As a first step, the company has sold truck leasing and rental subsidiary Rentway – Canada’s largest truck buyer with its fleet of more than 10,000 trucks, tractors and trailers – to U.S.-based Penske Truck Leasing for $105 million.

Rentway has a network of 40 facilities in Canada and the U.S. Still, that pales in comparison to Penske, which operates 142,000 heavy, medium, and light-duty trucks to serve customers from approximately 460 locations in the U.S., Canada and Mexico.

Under the plan that has been structured over the past year, Trimac will wipe out its $28-million corporate debt, pay off $60 million toward Trimac Transportation System’s $200-million debt, and bid for $80 million of the company’s common stock at $9 per share. About $25 million in non-strategic investments will be sold, while the company plans to divest itself of $80 million in non-strategic business interests by the end of the year.

Through the restructuring, the 3,300-tractor and 6,000-trailer Trimac Transportation Systems says it will be able to better compete in a world of merging truck fleets.

And according to Trimac vice-president of corporate development Bob Elgar, days of higher interest, driver shortages and high fuel prices are not an environment in which you want to have a high debt-to-equity ratio.

While Canada has seen some bulk-related mergers and acquisitions – among them Trimac’s recent purchase of DSI Transport – the phenomenon has been more apparent in the U.S., says Trimac Transportation Services president Andy Zaleski. Trimac is now the second-largest bulk hauler in Canada and the U.S., following the massive 1999 merger of Montgommery and Chemical Leaman tank lines.

Trimac Transportation Systems enjoys $700 million in annual revenue, but it’s still a segmented market that takes the lion’s share of the $6-billion for-hire bulk transportation business, Zalinski says.

Consolidations within the chemical industry are also pushing for similar mergers among truck fleets, he adds. “The major client base we work for is undergoing a sea of change.”

Once merged, many of these companies want to deal with “core suppliers” rather than an array of fleets.

About a third of Trimac Transportation’s revenue comes from shipping chemicals, with 27 per cent coming from dry bulk, 27 per cent from woodchips and 13 per cent from petroleum.

“The initiatives outlined today represent a major step in the strategic repositioning of Trimac,” company president Jeff McCaig said in a July 4 conference call regarding the new direction. “We’ve been going through a metamorphosis.”

The company’s last big selloff involved the Keating Energy Services contract drilling business in 1997, when Trimac decided to focus on bulk trucking and leasing. That gave company shareholders $360 million.

Trimac has since sold $75 million of its interest in other companies.

Since May 5, it has shed another $25 million in non-strategic investment interests, as well as its remaining 1.05 million shares of Pioneer Natural Resources.

Company officials are still in talks with Penske about ways it might be able to preserve their massive purchasing power for truck-related equipment.

Trimac is expected to issue a $4.5-million after-tax loss for the second quarter of 2000.

The share price it’s offering under the restructuring plan is 20 per cent higher than the 30-day average closing price of $7.48 recorded by the Toronto Stock Exchange as of June 30.

If the maximum number of shares are taken up under the offer, McCaig Holdings, run by JR McCaig and JJ McCaig will own 24.6 per cent of the corporation, up from its 18 per cent stake in common shares. Other members of the family own about 10 per cent of the outstanding shares. n

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