MONTREAL -- TransForce has yet to close the acquisition of Ontario-based Contrans, but Canada's largest trucking and logistics companies is already considering spinning off its truckload operations as early as next year, likely followed by its waste division.
"I'm working on both things at the same time," CEO Alain Bedard said Friday.
TransForce (TSX:TFI) said it has received sufficient shareholder support for a $495-million cash takeover offer for the Contrans trucking group but continues to await a response from Canadian competition authorities.
The Montreal-based company said it has been in discussions with the Competition Bureau and expects the 30-day waiting period will expire on Wednesday. As a result, TransForce has extended the offer deadline to Nov. 11.
TransForce said it has received shares or offers of support representing 70 per cent of the Contrans class A shares and all of the multiple-vote class B shares, providing more than the two-thirds majority required under the offer.
After closing, TransForce plans to focus on reducing debt but not issue more shares.
Shareholders of Woodstock-based Contrans Group (TSX:CSS) would receive $15 a share, including $14.60 cash from TransForce and a special dividend of 40 cents per share from Contrans.
TransForce wants to focus its efforts on developing its package and courier, small truckload and logistics business. To do that it wants to shed the trucking and waste operations, which together account for more than one-third of its overall revenues and about half of its pre-tax operating profits.
Bedard said the company is looking at various options including spinning them off, selling them or doing a"vend-in" -- similar to a reverse takeover where it gets lots of stock in the other company. The tax implications are very different for each option, he told analysts.
He said trucking is a good business, but it needs to increase its size and reach, something that will be helped by Contrans and recent acquisitions in the United States.
David Tyerman of Canaccord Genuity said the strategy of buying Contrans only to sell the larger trucking business seems odd, but makes sense.
"They needed to have more size to really be able to do this better," he said in an interview.
Bedard said the priority is to address the truckload business, possibly in 2015, followed perhaps a couple years later by the waste division, which includes landfills.
"Waste is a diamond in the rough...(but) it's not valued properly."
He foresees TransForce becoming in three years "a huge cash flow machine" with that focuses on three core areas of operation.
In the meantime, TransForce is growing its e-commerce business by partnering with Google and an unnamed U.S. national retailer to provide same-day deliveries in some major U.S. markets.
"We're going to do great things in 2015 here in the U.S. and that's the area that we're focusing," Bedard said from Dallas, Tex.
TransForce reported Thursday that its third-quarter net income fell to $41.5 million or 41 cents a share from $44 million or 45 cents in the year-earlier period. Its revenue for the three months ended Sept. 30 soared to $981.1 million from $775.1 million a year earlier, mainly because of acquisitions.
Contrans shares closed Friday at $14.93 while shares of Montreal-based TransForce closed up 17 cents at $27.56.