Industry analysts seem to agree that TransForce's offer to buy Vitran's Canadian operations for US$4.50 per share would be a good deal for Canada's largest LTL carrier.
Walter Spracklin, analyst with RBC Capital Markets, said the deal could boost TransForce's LTL revenue by about $200 million, or 30%. It would also "increase TFI's density within the Canadian LTL market and we see this as positive for LTL pricing going forward."
Since TransForce indicated in its announcement that it would continue to run Vitran as a standalone company under its existing management team, Spracklin said "we would not expect TFI to extract meaningful synergies from this transaction. However, it is likely that TFI would be able to enhance the efficiency of these operations."
He concluded "Overall, we view this transaction favourably from a strategic perspective as it supports improved pricing power within a market that is plagued by excess capacity and is aligned with management's stated acquisition strategy of consolidating the Canadian LTL space."
David Newman, director, equity research, transportation and industrial products with Cormark Securities, agreed the deal makes sense for TransForce.
Newman calculated the deal to be worth about US$73.9 million. He said TransForce would be likely to consolidate some of Vitran's 23 Canadian terminals to rationalize its network.
"We believe a TFI-Vitran merger could result in strong synergies, given a strong coast-to-coast overlap between their LTL operations in Canada," Newman said. "The initial synergies could be in the realm of several million dollars (delisting of Vitran, SG&A) and perhaps rise from there as the geographic overlap of their combined operations are rationalized and consolidated, thereby increasing utilization. A more rationalized Canadian LTL market could lead to improved pricing and margins."
