Vitran’s sale of U.S.-based LTL operations is a done deal
October 08, 2013
Toronto-based less-than-truckload (LTL) carrier and transportation services provider Vitran Corporation Inc. said today it has completed the sale of its United States-based less-than-truckload business, which was initially announced in late September.
Company officials said the business will be 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.
Vitran added that it amended its senior revolving credit agreement to reduce the borrowing capacity to $26.3 million (U.S.), which it said is the amount of the letters of credit currently outstanding for the U.S. LTL business. As part of the sale transaction, the obligations under the letters of credit remain guaranteed by the Company’s Canadian LTL business, according to the company, adding that the purchaser will reduce such letters of credit to zero within the next 90 days.
“We believe the sale of our U.S. LTL business gives our employees and customers the best chance to prosper while also preserving value for all of Vitran’s stakeholders,” said William S. Deluce, Vitran’s Interim President and Chief Executive, in a statement. “With the completion of this transaction, Vitran is now able to focus all of its attention and resources on its Canadian LTL business. Vitran’s board of directors, in accordance with the exercise of its fiduciary obligations, and with the assistance of its financial and legal advisors, will continue to pursue a course of action that it believes is in the best interest of Vitran and its stakeholders.”
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.
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 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.
Along with this completed sale, Vitran said in late September 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.
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