Trucker TFI is selling its US operations for $525 million

Quebec-based trucking giant TFI International is selling a significant portion of its operations in the United States and Mexico for a sum of US$525 million.

Posted at 11:43am
Updated at 4:49 p.m

Martin Vallieres

Martin Vallieres
The press

The transaction with Iowa-based US airline Heartland Express, announced Monday, involves deals that account for nearly half of TFI’s recent sales in the United States.

It includes full truckload and temperature-controlled trucking operations in the United States and logistics operations in Mexico.

According to TFI, this includes around 2,800 employees, 2,000 tractor units and 7,800 trailers. They had sales of $450 million in their last full fiscal year, 2021, with an operating profit of around $50 million.

TFI maintains its diversified cargo, specialty cargo and logistics operations in the United States. These activities add up to approximately $545 million in annual sales and approximately $31 million in operating income as of June 30.

According to TFI’s Chairman and Chief Executive Officer, Alain Bédard, the decision to sell a significant part of these activities in the United States is based on a “thorough evaluation” of all assets with the aim of “increasing the transport company’s liquidity”. . flow and return on investment”.

By focusing TFI’s US operations on higher-yield (diversified) LTL operations and specialty truckloads and logistics, this transaction will reduce our capital intensity.

Alain Bédard, Chairman and Chief Executive Officer of TFI

TFI also intends to use the net result of this $525 million transaction to “repay short-term debt” while increasing the capitalization of its trucking operations, which can “earn higher returns.”

“This divestiture of the US business will make TFI a less cyclical and less capital-intensive company, while not impacting earnings per share expectations, which I think are extremely positive for its shareholders,” Benoit Poirier said. Analyst at Desjardins Capital Markets in Montreal.

The analyst also notes that “the reduction in leverage (debt ratio) will increase TFI’s flexibility in terms of capital allocation.”

In this context, Benoit Poirier advises in a note to investors: “TFI stocks remain my favorites in the transport sector and I recommend buying them before the announcement of the third quarter results” (expected late October to early November).

On the stock exchange, where TFI is valued at CAN11.6 billion, investors in Toronto- and New York-listed shares reacted differently to the announcement of this major resale of US operations for half a billion dollars.

In late trading on Monday, TFI shares fell 0.7% in New York to $100 and 0.4% in Toronto to $132.

Meanwhile, the transportation sector index on the US stock exchange, the S&P 500 Transportation Index, was also down 1% by the end of the session.

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