Vitran plans to sell U.S.-based LTL business
September 23, 2013
Toronto-based less-than-truckload (LTL) carrier and transportation services provider Vitran Corporation Inc. said today it has entered into an agreement to divest its United States-based LTL business.
Company officials said the business will be acquired by Matthew Moroun, an industry veteran associated with various transportation industries, including: LTL, TL, flatbed, 3PL, and warehousing.
Vitran said that under the terms of the proposed sale transaction, an entity controlled by Mr. Moroun will pay $2 million to acquire 100 percent of the common stock of the wholly-owned U.S. subsidiary which operates Vitran’s US LTL business, thereby assuming the U.S. business’s ongoing liabilities. And it added that the buyer will fund the U.S. operating business between today and the date of closing, with the transaction is scheduled to close within 10 business days and is subject to certain conditions including obtaining the consent of Vitran’s bank syndicate.
But it cautioned that this is not a done deal by any stretch, explaining there is no assurance that the proposed transaction will be completed within this timeframe, if at all.
“We are pleased to have reached an agreement to sell our U.S. LTL business,” said William S. Deluce, Vitran’s Interim President and Chief Executive Officer, in a statement. “For the last several years, Vitran has invested substantial time and capital to improve its U.S operating results. While we believe these efforts have made Vitran’s U.S. LTL business a better operating company, they did not result in financial results that are acceptable to management or the Board.
With the assistance of our financial advisors, we have evaluated a wide range of strategic alternatives over the last five months. We are pleased to have agreed upon a plan that we believe gives Vitran’s U.S. LTL employees and customers the best chance to prosper while also preserving value for all of Vitran’s stakeholders.”
In late July, Vitran announced that for its second quarter earnings it was down 10 percent in revenues to $165.4 compared to $183.8 million in the second quarter of 2012. Vitran recorded a net loss from continuing operations of $17.0 million, or $1.03 per basic and diluted share, for the quarter ended June 30, 2013 compared to a net loss from continuing operations of $5.7 million, or $0.35 per basic and diluted share, for the 2012 second quarter.
Deluce, a Vitran board member, replaced Rick Gaetz, whom resigned as president and CEO and a Director of the company in early April. Deluce has been the CEO and a director of various corporations and that Vitran’s Board said in April that this experience combined with his history as a successful entrepreneur, made him well suited to serve as interim President and Chief Executive Officer.
Last March, Vitran completed the sale of its Supply Chain Operation (SCO) unit to Portsmouth New Hampshire-based third-party logistics (3PL) services provider Legacy Supply Chain Solutions for $97 million. When that deal was made official, Vitran said it intended to use a portion of the net proceeds from the transaction to fully reduce its outstanding debt under its senior revolving credit facility, and will have approximately $50.0 million of remaining cash on the balance sheet. SCO accounted for 14 percent of the company’s revenue, former CEO Gaetz told LM in March.
Following that deal, Stifel Nicolaus analyst David Ross wrote in a research note that “Vitran continues to be a big potential turnaround story,” explaining that following sale of SCO it had “plenty of financial breathing room and capital available…to execute a turnaround.”
Ross also noted that the new U.S. LTL leadership had been making significant progress in revamping the U.S. network, including getting the U.S. business on a single linehaul system), but cautioned it may take some time before the work will show through in earnings.
What’s more, following the sale of SCO, coupled with other related management changes, many industry followers thought Vitran was primed for a turnaround in the U.S. LTL market.
This planned sale could have a major impact on how Vitran looks and feels as a company going forward, considering that Vitran’s U.S. LTL business represented approximately 72.4 percent of total LTL revenues for the year ended December 31, 2012, according to the company’s annual report.
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