Acquisition of 1.5 billion in the United States | A big catch for trucking giant TFI

Quebec trucking giant TFI International is using major means to become one of the main players in the specialized transportation segment south of the border: it is buying the American company Daseke in a transaction that values ​​the latter at around 1.5 billion.

“We are the dominant player in Canada in specialized transportation, but we were not in the United States,” summarized TFI President and CEO Alain Bédard on Friday in a telephone interview with The Press. We will now be among the biggest. »

Formerly known as TransForce, the Quebec company is offering US$8.30 for each of Daseke’s shares, which corresponds to a premium of approximately 70% compared to its closing price on Thursday on the NASDAQ. The offered price is nevertheless lower than the 52-week high of US$9.58 reached last winter. The boards of directors of both companies say they unanimously support the proposed transaction.

Established in the Dallas, Texas area, this American company presents itself as the largest in the niche of platform trailers – which are used, for example, to transport equipment as well as construction materials. It operates a fleet of 4,500 tractors and 11,000 trailers.

TFI will have to pay around 515 million to acquire all the outstanding shares of Daseke. The Quebec company will, however, have to assume other charges, such as the debt of the American carrier, estimated at approximately 880 million.

In the medium term, the acquisition could pave the way for a spin-off of the truckload and specialized trucking division, which is expected to post annual revenues of US$3.6 billion if Daseke’s activities are taken into account. No specific timetable was mentioned.

More difficult context

The trucking industry is facing headwinds as the economic slowdown weighs on demand and inflation puts pressure on costs. The purchase of Daseke is timely, says Mr. Bédard, who believes that the context is about to change.

“You buy when the news is bad and you sell when it is good,” he says. We must not forget that infrastructure, schools, hospitals, roads and bridges need major investments. This benefits the trucking industry and even more so the flatbed trailer sector. »

Investors have reacted favorably to what is TFI’s fourth acquisition since the start of its financial year. On the floor of the Toronto Stock Exchange on Friday, the company’s stock ended the day up 7.9%, or $12.76, to reach $175.29. Since the start of the year, the stock is up around 27%.

For Cameron Doerksen of National Bank Financial, even if the purchase of Daseke makes sense for TFI, investors were probably expecting a different type of transaction.

“TFI has mainly made complementary acquisitions in the United States,” the analyst writes in a note. We believe investors expected the company to buy other less-than-truckload and logistics businesses. »

A face that changes

TFI generates more than half of its revenues in the United States. In the specialized transport niche, its turnover barely exceeds 100 million US dollars. Adding Daseke’s activities will change things. At the end of the nine-month period ending September 30, it posted revenues of 1.2 billion US dollars.

This is a decline of around 15% compared to the same period in 2022.

“We are capable of making acquisitions of companies that are going through more difficult times,” says Mr. Bédard. Daseke’s interest costs are 10%. They are in a bad position. It’s staggering. Our average rate is around 4.5%. With our balance sheet, we are capable of making this type of acquisition. »

Closing of the transaction, which must obtain customary regulatory approvals in Canada as well as the United States, is expected during the second quarter of 2024.