TSX:TFII - Post Discussion
Post by
retiredcf on Aug 22, 2022 11:43am
TD
Have a $160.00 target. GLTA
TFI International Inc.
(TFII-T) C$132.60
Agreement With Heartland Express to Sell $525 Million in Assets Event
This morning, TFI announced an agreement to sell its CFI Truckload, Temperature Control, and Mexican non-asset logistics businesses to Heartland Express for US$525 million, subject to certain agreed upon adjustments. The transaction is expected to close in Q3/22, and is subject to regulatory approval.
Impact: SLIGHTLY POSITIVE
Based on our preliminary understanding of the transaction, we view the sale of TFI's more capital intensive CFI business positively. TFI has a history of successfully deploying new capital and raising capital through asset divestitures. We believe that there are several positive considerations in the transaction; TFI is maintaining its 2022 EPS guidance, selling assets at a multiple of EBIT that we believe is in-line with its own current multiple, reducing its overall asset intensity, and generating capital that can be redeployed into businesses that could be more constructive for its own valuation.
CFI operates within TFI's U.S. Conventional TL segment. It provides dry van and temperature-controlled truckload services to customers throughout the U.S. and into Mexico and Canada. CFI has approximately 2,000 tractors, 7,800 trailers, and 2,800 employees. As part of the transaction, Heartland will also acquire six terminals located throughout the U.S., as well as CFI's Mexican logistics business which has a network of nearly 200 C-TPAT certified Mexico carrier partners. TFI will retain its Dedicated and U.S. Logistics divisions, which generated trailing four-quarter revenue and operating income of approximately US$547 million and US$32 million, respectively.
In 2021, CFI generated approximately US$450 million in revenue before fuel surcharge (~7% of 2021 consolidated revenue before fuel surcharge) and US$50 million in operating income (~6% of 2021 consolidated operating income), implying an operating ratio of 89%. According to the Heartland Express press release, CFI is estimated to have been sold at approximately 5x run-rate adjusted EBITDA. The proceeds are expected to be used to pay down near-term debt maturities and redeployed in TFI's LTL, Logistics, and Specialized Trucking segments. Post-closing, TFI expects its funded debt-to-EBITDA ratio to decline to approximately 1.0x from 1.3x as of June 30, 2022. Management has maintained 2022 EPS guidance of US $8.00.
Be the first to comment on this post