- TFI International is set to acquire Apps Transport Group, based in Ontario, Canada, according to a news release Friday.
- Apps provides LTL, TL, warehousing and distribution in Canada, according to the news release. Nearly half its business is intermodal, and the company's customer portfolio includes the retail, consumer goods, automotive supply, food and beverage, industrial and commercial supply, and wire and cable industries.
- Apps generates roughly $76 million in annual revenue and has more than 400 employees, including almost 100 dedicated drivers and more than 80 independent contractors. Apps operates nearly 70 trucks, some 250 trailers and about 250 containers from six facilities.
"If we can find the right company, perfect," CEO Alain Bédard said on the company's second-quarter earnings call in July, reinforcing TFI's focus on LTL in Canada. The TL and LTL segments had margin increases of 3 and 7.3 percentage points, respectively, in Q2.
The company has made about 80 acquisitions in Canada, the U.S. and Mexico since 2008. As of late, TFI has been targeting specialized TL firms, buying three already this year: Keith Hall & Sons Transport in August, and MCT Transportation and CT Transportation in June.
"M&A has been you know the engine of TFI; that's in our blood," Bédard said on the call.
On Aug. 17, TFI closed its common-shares offering in the U.S. and Canada, garnering gross proceeds of $129 million. The company planned to use the money to increase the amount available under its credit facility, which it would use "for general cooperate purposes, including acquisitions," TFI said in a news release.
TFI had put acquisitions on hold in the first quarter of this year, Bédard said on the call. The company ended the first half of the year spending $75 million on four acquisitions, though touting $1 billion in liquidity. TFI's strategy amid down market conditions was to make smaller acquisitions. As soon as conditions improve, "maybe we'll bring back the big whale," he said.
M&A volume and value declined during the first half of 2020 compared to the peak in the second half of 2019 for the transportation and logistics industry. But average deal size increased 9% to $377 million, compared to the first half of 2019, according to PwC. The firm expects deal activity to pick up in the second half of the year, although perhaps not reaching peak-2019 levels.
"Consistent with our initiation earlier this year, with the current management team having successfully completed and executed over 60 transactions in the last decade we continue to believe M&A, even at the small scale seen YTD, can be a powerful growth driver, if executed well," Morgan Stanley said in a note Monday.
TFI laid out numerous risks in its Q2 earnings report that could result from acquisitions and integrations, such as inconsistencies in standard operating procedures, challenges with recruitment and retention, and safety and quality of service issues.
But regarding his company's latest purchase, Bédard specifically mentioned in a statement the "combined real estate footprint" Apps and TFI now have. Apps has terminals in Mississauga, Ontario, located just outside Toronto; Delta, Kelowna, and Kamloops in British Columbia; and Edmonton and Calgary in Alberta. With the expansion, TFI plans to continue bolstering its customer service, Bédard said.