MONTREAL— Canadian trucking giant TransForce has struck a deal to buy Contrans for $495 million in cash plus $85 million of debt, for a total of $580 million, or to use the words of TransForce CEO, Alain Bédard, “the most expensive and largest deal in my life.”
Here are seven business growth tips from Bédard:
- The Canadian economy is flat: “It’s not easy when you have an economy like you have right now in Canada where there’s no growth. The consumer is highly in debt and this is why the economy is flat in Canada,” Bédard said.
But for TransForce, strategic acquisitions like that of Contrans, will continue to drive growth in a flat environment, Bédard explained.
After the proposal to buy Contrans went public, TransForce’s shares hit an all-time high of $27.64 in Friday trading on the Toronto Stock Exchange.
- Truckload pricing environment is slowly improving: “We’re seeing a little bit of improvement,” Bédard said. “Not because the demand is growing like no tomorrow; the demand is probably growing a little bit. [But] there are fewer drivers and financially sound guys who can buy equipment, so the market is slowly improving and the balance between the offer and demand is getting closer to being fair.”
- A lifetime deal: “The market in Canada is very small. There are only three significant players: Murray Mullen, Stan Dunford and myself,” Bédard said. “It’s a lot of money- it’s a lot more than what I wanted to pay in my mind, but I said you know what, okay, it’s a good company and a good team and a good fit for us. I’ll do the deal at this price.”
- The creation of a Canadian trucking powerhouse: “Contrans is a great specialty truckload with a very strong market position in Ontario and a small market position in Québec,” Bédard said. “TFI is completely the opposite. TFI has a strong specialty truckload in Québec, but is not really present in Ontario. So the combination of the two is a good complement to each other. This is really the creation of a dominant player in Canada.”
- Contrans — a well-oiled, lean machine: “I’m buying the company in my mind at a huge price. It’s fair, agreed, but it’s a lot of dollars, lots of investment. So I’m not going to change the recipe,” Bedard said.
“My philosophy has always been, we don’t fix something that’s not broken,” he added. “To me, it’s very important that the message is very clear that, we’re not buying a company for $600 million just to see those guys fly away in six months because we’re trying to change the company.”
Bédard expects to save $10 million or more by eliminating Contrans’ costs as a public company, but insists there will likely be no cuts or layoffs.
“Contrans is a very well-oiled machined, it operates lean and mean. They don’t like fat,” Bédard said.
- No overlap of business: “There are no competition or concentration issues,” Bédard said. “Contrans is really the top specialty freight carrier in Ontario and we have a van transportation business in Ontario but in terms of specialty, we’re not in Ontario; we’re very negligible. In the case of Québec, Contrans is present in Québec-small, but they are- and the combination of the two in Québec is no big deal. They have a small LTL division (in Québec) which is mostly a trans-border business between ON- QC and NY-NJ area, it’s so small, it’s nothing.”
- LTL market is shrinking, but U.S. growth can be seen on the horizon: “On the LTL side, the market is shrinking. It’s a fact,” Bédard said. “But at the same time, people in the LTL world are starting to understand it doesn’t make any sense to chase volume and lose money. They understand that this impairment of volume that started about five years ago in Canada is not coming back. I mean, we lost so many plans in Ontario and in Québec, those plans are not going to reopen so we have to adjust.”
But TransForce has some room to grow organically in the U.S. through some acquisition, Bédard said.
“If e-commerce grows in the US, which I think it will, and moves a little bit more towards the last mile guy, that could benefit us on the growth side in U.S. We’ll know in the next six months how this e-commerce thing goes.”
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