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Why “Everybody’s A Winner” with TransForce-Contrans Deal

MONTREAL Industry watchers seem to agree: the Canadian trucking industry will be well served by TransForce’s purchase of Contrans.

Not only is a formerly fragmented sector becoming more efficient, the driver shortage will keep rates up. Plus, the deal will probably trigger more consolidation activity.

Says Doug Payne, president and CEO of the transportation management consultants Nulogx, Inc: “I’m quite happy to see this, in fact. It’s great to see Canadian companies with similar growth strategies work together. Everybody is a winner in this situation.”

Notes Noel Perry, an analyst at the Indiana-based consultancy FTR Associates: “Consolidation has historically been limited in trucking because of the mobility of drivers and books of business.

“In the 1990's there were many attempts at consolidation that failed when the acquired drivers left and the customer base moved to other carriers.

“Since that time there has been very little acquisition activity in U.S. trucking, certainly much less than in other markets.  I expect a modest uptick in acquisition but no major increase.”

Meanwhile, at least one Ontario-based fleet owner, Michael Ludwig, who runs 18 rigs out of Simcoe, ON., agrees.

“First of all,” he says, “Congratulations to both Alain Bedard and Stan Dunford for making it work.

“I can't really see how this is going to be bad for trucking. On one hand economies of scale will make it more difficult to compete against TransForce rates, but on the other, less players in the game should boost base rates,” he says.

“I expect the guy with the biggest bankroll and least debt is most likely to be on top. However, a market-share war is not likely to happen since there already aren't enough drivers out there to meet shippers requirements."

For other smaller Canadian fleets like Ludwig who think that this big transaction means suitors will be knocking at their doors, Payne, CEO of the transportation consultancy Nulogx. Inc. has a word of caution.

He described the TransForce-Contrans deal as “very much a dollars-and-cents” transaction because both companies were publicly traded.  So, he added, privately held fleets interested in becoming takeover targets must remember that a potential purchaser can actually measure the market value of a publicly traded company such as Contrans.  It’s not so easy to do with a privately held fleet.

In a recent report on the merger by RBC Capital Markets' Trucking Analyst Walter Spracklin, TransForce and Contrans are described as "best-positioned to profit from improving sector fundamentals.

"We see significant earnings upside from the integration of recent acquisitions (particularly in P&C and LTL) and our earnings outlook for TransForce is notably above consensus." 

Finally, another unpredicted byproduct of the move, according to Bob Tebbutt of Armour Risk, could be the larger consolidated fleet will be shedding costs; and that could lead to more alternative-fuel consumption. “

“Consolidation is a good thing for the companies,” Tebbutt said,  “and in the search for lower operating costs a larger company may be able to investigate more closely the use of natural gas as a fuel.

 
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jeff

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Many people believe that the TransForce- Contrans deal is a very big deal, and that it should not be allowed to happen. Many truck drivers are leaving trucking. This deal will discourage young people from going into trucking unless a standard driver wage comes in. I was told that truck drivers as solo drivers need to make $.48 per mile plus $21.00 per hour and for team at $.60 per mile plus waiting time at $25.00 per hour. Many small truckers believe this deal will push many of them out of business.

Anonymous

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This deal makes Tranforce to be very big. TransForce could set a new standard in truck driver pay and waiting time. This company is big enough to stand up to (bad shippers) and work with the truck drivers and owneropertors to make this job pay like a skilled job and the drivers treated better. Many people in the private sec. and the goverment will be watching closely. Many people think that trucking may have to be regulated in how drivers are treated. I hope that truck driver pay goes up and truck drivers are paid for all hours worked. If transforce uses their power to push down small trucking companies and import TFWs. I expect to see truck shortage and or protest that will force the gov. to act.

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