A Montreal-based Transportation and Logistics company, TransForce Inc., is set to acquire Texas-based Velocity Express and its subsidiaries for approximately $35 million.
Velocity is a provider of customized, same-day regional delivery services across the U.S. and Western Canada. The transaction will be finalized by the end of this month.
"The acquisition of Velocity further enhances TransForce's density in the same-day North American package and courier market and reflects our disciplined and selective approach in building our network. The transaction will be accretive for TransForce and will provide a sound return on investment to the benefit of our shareholders," Alain Bédard, chairman, president and chief executive officer of TransForce said in a press statement.
The acquisition of Velocity increases TransForce's network to more than 80 locations across U.S. and Canada. It will also acquire 2,600 workers and independent contractors.
The acquisition is expected to add around $160 million of additional revenues for TransForce, which is equivalent to five per cent of the company's total revenue and 14 per cent of its package and courier business.
In addition, analyst Maxim Sytchev of Alta Corp Capital told The Montreal Gazette that TransForce's package and courier division margins may increase to 15 to 16 percent from the current nine to 10 percent.
Analyst Benoit Poirier of Desjardins Capital Markets told the newspaper that once Velocity's business is established, TransForce's earnings will be boosted by eight cents per share.
The complete integration will take around 12 to 18 months. Last year, TransForce's revenue was valued at $869 million in the first nine months of 2012, which was equal to 37 percent of company's total sales.
The company also saw its shares increase from $1.07 to $22.19 Thursday afternoon at Toronto Stock Exchange. Sytchev said that TransForce has acquired around 140 companies and may also be looking at acquiring Flint Energy Services rig too.
"We continue to view TransForce as one of the very few entities in the industrial space capable of increasing its margins in a lackluster top line growth environment," Sytchev said.
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