Transportation deals: Vitran acquires LVLA to build up retail logisitcs presence in the U.S.

Jeff Berman, Senior Editor -- Logistics Management, 12/3/2007

TORONTO and ONTARIO, Calif.—Vitran Corporation Inc., a Toronto-based provider of transportation and logistics services, recently announced it has acquired Las Vegas/L.A. Express Inc. (LVLA), a provider of retail supply chain management services based in Ontario, California, for approximately $12.6 million.

LVLA has roughly 470,000 square feet of supply chain and logistics space under management, which will bring Vitran’s total amount of square feet in the U.S. and Canada to 1,240,000, according to a Vitran statement. Vitran added that LVLA currently operates from six leases facilities, and along with its Ontario, California headquarters, it has distribution centers in San Diego and Chino, California, Las Vegas, Phoenix, and Albuquerque. And for the 12-month period ending September 30, 2007, LVLA had an estimated revenue of $25.5 million.

In a conference call earlier today, Vitran President and Chief Executive Officer Rick Gaetz told Wall Street analysts and members of the media that this acquisition is part of Vitran’s plan to selectively develop its logistics group in the retail space with an eye on U.S. geography expansion.

“This [acquisition] compliments our sole existing logistics operation currently in Chicago, which is operated on a dedicated basis for Sam’s Club,” said Gaetz. “We have said repeatedly in the past that we want to make acquisitions that will allow us to expand our logistics operation—or footprint—and create an immediate earnings bump. This acquisition does both.”

LVLA was owned by the father and son team of Ronald and Michael Adley. Gaetz said Ronald Adley will remain on board at Vitran for a one-year period as a consultant, and Michael Adley and members of his management staff will be retained by Vitran and remain in their existing positions going forward, said Gaetz.

This new business gives Vitran the all important exposure to the U.S. West Coast, with LVLA being located 45 minutes from the Long Beach, noted Gaetz.  He added that LVLA’s Ontario, California office has many similarities to Vitran’s there existing Vancouver-based facilities that focus on logistics services.

In Vancouver, Vitran has a significant amount of deconsolidation business operations, as it relates to business coming in from Asia, said Gaetz. And LVLA currently performs some of these deconsolidation functions, and he said Vitran is excited about the potential “expandability” of this part of the business.

“LVLA’s focus, which is in perfect alignment with Vitran’s current supply chain business, is to bring value to U.S. retailers,” said Gaetz.

He explained that a major difference between Vitran’s operations and that of LVLA is that there is the lack of an inventory replenishment model in the LVLA operation. Gaetz explained that LVLA performs a deconsolidation, direct ship, and less-than-truckload (LTL) service for retail customers, which is akin to what Vitran does in Canada, Gaetz said. Gaetz also explained that in Canada Vitran has added a dedicated facility replenishment model as well, which does not exist in the U.S.

“We are absolutely delighted to find a company that has retail expertise in the supply chain and is in the right locations for us to supply our supply chain business south of the border,” commented Gaetz.

In a research note written last Friday, Credit Suisse analyst Jason Seidl said Vitran’s acquisition of LVLA is favorable as it represents a springboard for the extension of Vitran’s logistics business in the U.S. and offers the company access to the busy West Coast ports. Seidl added that LVLA’s primary customer base is comprised of large retailers like Payless Shoes, Bed Bath & Beyond, and Van Heusen.