Vitran shifts gears, announces it will be acquired by TransForce instead of Manitoulin

Less than three weeks after Toronto-based less-than-truckload (LTL) carrier and transportation services provider Vitran Corporation said it had entered into a definitive agreement to be acquired by acquired by Manitoulin Transport Inc., a Pembroke, Ontario-based provider of LTL transportation services, Vitran announced earlier this week that the agreement with Manitoulin has been terminated.

Instead of being acquired by Manitoulin, Vitran has entered into a definitive arrangement agreement with TransForce, a provider of transportation and logistics services for $6.50 per share. Prior to this announcement Transforce owned roughly 20 percent of Transforce’s total outstanding shares, following its November purchase of 10.44 percent of Vitran shares, according to a Toronto Globe and Mail report.

TransForce said that the total transaction, including the assumption of Vitran’s outstanding net debt of approximately $29 million at October 31, 2013, is valued at approximately US$136 million, adding that the $6.50 share price represents an 11.16 percent premium to Vitran’s closing price on NASDAQ on December 9, 2013, the day that Vitran’s proposed transaction with Manitoulin Transport Inc. was announced, and a 41.38 percent premium to the closing price on NASDAQ on September 20, 2013, the day before the announcement of the sale of Vitran’s US Less-Than-Truckload (LTL) business.

“We are delighted to have reached agreement with Vitran for what represents the acquisition of an important strategic asset for TransForce with considerable synergistic benefits in the near term and into the future,” said Alain Bédard, Chairman, President and CEO of TransForce, in a statement. “We are looking forward to leveraging the strengths of both companies to enhance our service offering for our customers and welcoming the Vitran employees to the TransForce team.”

Vitran said its board of directors “determined that TransForce’s proposal was a ‘superior proposal’ for the purposes of the arrangement agreement. And it added that Manitoulin—whose early December offer of $6 per share, with the total transaction including the assumption of Vitran’s outstanding net debt of $29, which was valued at roughly $128 million—has waived its right to match the TransForce proposal. The company said that Vitran and Manitoulin have agreed to terminate the Maintoulin contract concurrent with the entering into of the TransForce agreement, with a $4 million termination fee being paid by Vitran.

Prior to the early December announcement that Manitoulin was going to acquire Vitran, that development followed the aforementioned completion of the October sale of Vitran’s United States-based less-than-truckload business, which was initially announced in late September.
The business was acquired by Matthew Moroun, vice chairman of Warren, Mich.-based LTL carrier Central Transport International and an industry veteran associated with various transportation industries, including: LTL, TL, flatbed, 3PL, and warehousing.

Vitran said that under the terms of the agreement Moroun acquired 100 percent of the common stock of the wholly-owned U.S. subsidiary, which owns Vitran’s U.S. LTL business. And the company said it capitalized the U.S. LTL business with the net amount of $3 million (U.S.), after deducting the $2 million (U.S.) purchase price received by Vitran from the purchaser. Vitran added that Moroun funded a cash deficit of approximately $1.4 million (U.S.) in the U.S. LTL business between September 23, 2013 and the time of closing.

In late September, when this deal was first announced but not completed, Deluce said that for the last several years, Vitran has invested substantial time and capital to improve its U.S operating results. And while it maintained 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 its Board.

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.”

In late September Vitran said that it received an unsolicited, non-binding proposal and letter of intent from TransForce Inc., a Montreal-based transportation staffing agency, in which TransForce proposed to acquire all of the issued and outstanding common shares of Vitran not already owned by TransForce for $4.50 per share, with TransForce currently controlling 9.51 percent of the outstanding common shares of Vitran.