CN announces deal to acquire the intermodal division of H&R Transport

Montreal-based Class I railroad carrier CN announced late last week that it has reached an agreement to acquire the intermodal division of Calgary, Alberta-based H&R Transport Limited.

H&R’s core focus is in the intermodal temperature controlled sector and is positioned as the largest refrigerated intermodal service provider in Canada, complimented with a sizeable, highly reputed, over the road refrigerated fleet throughout Canada, the USA and Mexico, according to the company’s website.

Financial terms of the transaction were not disclosed, and CN said it is subject to customary closing conditions.

“H&R is well known in Alberta and across the industry for investing in its people, systems, and assets, as well as its customer centric services and best in class operations, all of which is aligned with CN’s strategy to expand our presence in moving consumer goods,” said JJ Ruest, president and chief executive officer of CN, in a statement. “With the growing consumer economy requiring more sophisticated transportation solutions, CN’s strategy is to offer more end to end rail supply chain solutions to a wider range of customers.”

And Keith Reardon, CN senior vice president of consumer products and supply chain growth, said that CN recognizes the role of the Foder Family who acquired H&R in the early 1950s and worked to grow the original two tractor operation based in Lethbridge, Alberta.

“We have a longstanding relationship with H&R Transport,” he said. “As a cross country supply chain partner, we know that their continued investments in technology and in their employees has earned them a very enviable reputation.”

Ravi Shanker, Morgan Stanley analyst, wrote in a research note that H&R Transport has a large refrigerated focus, potentially providing a better mix of business to CN.

“CN’s goal with the acquisition is to expand its intermodal service offering, move more consumer goods, and convert customers to their rail network,” he noted. “After the deal closes, H&R will be included in CN’s ‘intermodal revenue’ line. CN mgmt. noted plans to keep H&R employees and leverage their knowledge and client base.”

CN has been active on the acquisition front in recent months. In March, it announced it officially closed its acquisition of the TransX Group of Companies, which was initially announced in October 2018.

TransX was established in 1963 and has 3,000 employees. It has 1,500 trucks, 4,000 trailers, 1,000 intermodal containers, and 12 North American terminals. It handles 72,000 shipments per month. CN officials said that TransX will continue to be based in Winnipeg and will operate independently.

When the deal was first announced, CN’s Ruest said that it creates a solid framework to serve a growing consumer economy with transportation options that bring more supply chain flexibility to its customers.

Analyst Shanker said that these recent acquisitions, coupled with other initiatives CN is working on “underscores CN management walking the walk on non-Rail M&A as a way to keep the topline afloat as traditional rail end markets mature.”