TFI Intentional Stalking??? Consolidate or be Consolidated…This acquisition just makes so much sense to me. The big player TFII.TO 3.3B Market Cap taking out TTR.V 55M market Cap.
Other option, with TTR.V paying back so much debt this year and increasing its credit facility you could see them back on the acquisition trail in 2019.
Here’s Why;
Valuation Gap
TFII.TO Trades at 7.0 – 8.0x EV/EBITDA
TTR.V Trades at 4.0 – 5.0x EV/EBITDA
The valuation gap gives TFI the multiple arbitrage on any purchase of TTR.V to be accretive to TFII.TO shareholders.
If you look on a pure EBITDA basis TTR.V essentially trades at only 2x EBITDA debt or no debt it would be highly accretive.
Insider Ownership
A large holder in Titanium in Trunkeast investments which owns 40% of the company, they took the company public and would like to see a return on their investment and the liquidity event of an acquisition gives them the exit of the position
Growth Rate Differential
If you look at the core organic growth rate at TFI it is negative and if you look at TTR the core organic growth rate is running 20%+ in its core trucking business and its Logistics business is up 100% year to date.
The differential in growth rates makes gives the larger player access to growth and take advantage of consolidating the smaller business into its network and taking out costs. I don’t want to use the word but I will cost synergies...
TFI Capital Allocation Plans
TFI recently exited a portion of its Ontario business as it was not profitable enough for them, in the mean time they have been rebuilding their Ontario/Quebec transportation structure by acquiring a trucking firm on October 1 and talking about a further consolidation of 2-4 deals in the geographic region.
TTR has a strong GTA presence and their recent venture down to London/Windsor area and there cross border business has been killing it lately.
At What Price
Analysts have a 3.00/share target price on TTR.V implying 100%+ upside.
On my 24M EBITDA est. and 40M in net debt figure for FY19 for TTR.V and using a peer group multiple of 6.0 - 8.0x EV/EBITDA on a takeout gets me to share price of 2.85 – 4.15/share or 3.50/share at the midpoint or +150% upside.
Probably wouldn’t get the top end but remember, 52 week high for the stock was 2.40/share… nothing has really changed with the core business. A price in the range of 2.50 – 3.00/share would be tough to turn down…
LONG