TransForce Agrees to Buy Transport America For $310 Million to Expand Presence in US

This story appears in the June 9 print edition of Transport Topics.

Canada’s TransForce Inc. agreed to buy Transport America Inc. for $310 million in order to expand in the U.S. truckload sector, a move that could signal a resumption of the acquisition trend in that market.

Montreal-based TransForce, which ranks No. 8 on Transport Topics Top 100 For-Hire Carriers in the United States and Canada, on June 2 said with the deal it was assuming $150 million in debt of Transport America, which is No. 72.

“This acquisition will immediately provide TransForce with a critical mass in the highly fragmented TL sector in the United States,” said TransForce CEO Alain Bedard in a joint statement with Transport America.

The transaction was the first among the largest tier of U.S. carriers this year, after a 2013 surge in merger activity that included multiple transactions among Top 100 carriers.

TransForce’s move also continues diversification of the company through acquisitions.

“This acquisition portends that there will continue to be a trend of mergers and acquisitions in trucking,” Thom Albrecht, an analyst at BB&T Capital Management told Transport Topics on June 3. “Acquisitions are going to be important for a lot of companies that want to grow, particularly in truckload.”

TransForce has made 10 acquisitions in trucking over the past five years. The most recent one was the Canadian less-than-truckload assets of Vitran Corp. Inc., which was completed in March. Other purchases have included package carriers, including Dynamex, Velocity Express and package carrier DHL’s Canadian unit DHL Express Canada.

Before the Transport America purchase, TransForce’s package and courier revenue accounted for about 40% of revenue, with LTL and truckload each around 20% and the balance in specialized services such as energy markets.

Transport America CEO Scott Arves told TT on June 3 that the transaction accomplishes several goals, including creating certainty about access to capital and the potential for future growth.

He also said the company wanted to keep its current management in place (which it has) while ensuring benefits for drivers.

“Drivers want to be part of a growing company,” he said.

The Eagan, Minnesota-based company previously announced it was considering a public stock offering.

Combined, the two companies’ revenue would be $3.5 billion, based on TT100 data. TransForce reached $3.14 billion, while Transport America was listed at $363.5 million.

Transport America has been owned since 2006 by private equity firm Goldner Hawn Johnson & Morrison Inc.

The joint statement said completion of the transaction is targeted for the end of June.

Transport America has 12 terminals, with 2,000 employees and contractors, running 1,500 tractors.

Bedard of TransForce said on a June 2 conference call that he expected revenue to grow at Transport America to $400 million annually for the 12-month period beginning July 1, in part because of a newly won dedicated contract and also because of stronger U.S. truckload pricing.

“We could double this business over the next two or three years,” he said.

The U.S. company’s income before interest and taxes improved to $22.7 million last year from $19.2 million in 2012. Those results improved the operating ratio to 93.5 from 94.7 and produced net income in 2013 of $7 million, about 80% higher than in 2012.

Bedard also signaled that more acquisitions are expected.

He described Transport America as “a solid base to maximize further acquisitions, adding, “we are always on the lookout.”

Bedard also identified potential benefits from the deal, including shared customer information with its Dynamex unit and the potential entry of Transport America into Canada.

Transport America, in the regulatory filing, said its top 10 customers account for 45% of revenue and identified 12% of its business between the United States and Mexico.

Acquisitions, Albrecht said, are made more attractive because of the ongoing challenges in the driver market and the fact that shipment volumes still haven’t grown that much, limiting the scope of organic growth for carriers.

Last year’s acquisition market featured the purchase of Gordon Trucking by Heartland Express, a move that combined Nos. 61 and 47, respectively. In addition, Swift Transportation, No. 7, acquired Central Refrigerated, No. 56. And No. 53 Jack Cooper Transport bought the third-largest car hauler Allied Systems Holdings in a bankruptcy transaction.