Buy-rated TransForce Inc. is acquiring Contrans Group—after recently acquiring Vitran Corp. and Clarke Transport. Since Contrans’ management is tendering, you should too.
One transportation stock we used to regularly review in The Investment Reporter was Vitran Corp. TransForce Inc., however, acquired Vitran for US$6.50 a share. We advised you to tender your shares of this provider of less-than-truckload services.
To replace Vitran, we added Contrans Group to the transportation stocks we regularly review. With about 1,400 power units and 2,600 trailers under management, Contrans is one of the largest freight transportation companies in Canada. We advised you to buy Contrans for long-term share price gains as well as high and rising dividends.
Since we issued that advice, TransForce has agreed to make a ‘friendly’ acquisition of Contrans. It will pay cash of $14.60 for each of your shares.
The total payoff is $15 a Contrans share
Just before the acquisition, Contrans will pay a ‘special dividend’ of 40 cents a share with cash from the sale of its waste-management business. TransForce writes that “a total amount of $15.00 per share represents a premium of approximately 16.7% to the volume-weighted average trading price of Contrans’ Class A shares on the Toronto Stock Exchange for the 52 weeks preceding the announcement.”
We believe that it pays to do what the directors of a target company do. In this case, all of Contrans’ directors and executive officers have agreed to tender all of their shares to the offer. Contrans’ directors and executives know the company better than anyone else. Since they think that it’s worth tendering, you should tender too.
Contrans’ directors own all of the Class B multiple-voting shares and 14.1 per cent of the Class A subordinate-voting shares. We expect the number of shares tendered will satisfy TransForce’s requirement of two-thirds of both classes of shares. You have until at least September 17 to tender.
One small risk we see is the Competition Bureau. Before acquiring Vitran, TransForce acquired Clarke Transport and Clarke Road Transport. It seems to be gobbling up its competitors. TransForce bills itself “a North American leader in the transportation and logistics industry operating across Canada and the United States through its subsidiaries.”
Tender Contrans Group (TSX—CSS) to TransForce’s bid. Or sell as long as Contrans trades above $15 a share.
TransForce Inc. (TSX—TFI) remains a buy for gains and rising dividends. May TransForce be with you.
The Investment Reporter, MPL Communications Inc.
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