Mullen Group Ltd (TSX: MTL) has agreed to buy Gardewine Group LP for $172 million. The deal, which is expected to close in early 2015, will provide an exit to Canadian mid-market private equity firm TriWest Capital Partners, which invested in the Winnipeg-based Gardewine in partnership with management in November 2008. Founded in 1952, the company provides regional less-than-truckload, truckload and specialized truckload services primarily in Manitoba and Ontario. Mullen, an Okotoks, Alberta-based owner of a network of independently operating businesses, said the purchase will increase trucking and logistics’ share of its total revenue from 40 percent to around 50 percent in 2015.
PRESS RELEASE
Mullen Group Announces Acquisition to Expand its Trucking/Logistics Network
OKOTOKS, ALBERTA–(Marketwired – Nov. 24, 2014) – Mullen Group Ltd. (TSX:MTL) (“Mullen Group” and/or the “Corporation”) announced today the signing of a definitive acquisition agreement to acquire the business, including land and buildings, of the Manitoba-based Gardewine Group Limited Partnership (“Gardewine”), one of the largest privately owned transportation carriers in Canada, in an all-cash transaction for total consideration of $172.0 million (the “Transaction”). Gardewine is comprised of the following businesses: Gardewine North, Northern Cartage, Northern Deck, Northern Bulk and Northern Logistics. The Transaction is expected to close in early 2015, subject to the satisfaction of all closing conditions customary for this type of transaction, including the receipt of certain third party regulatory and governmental approvals.
Gardewine, a well-established and reputable company founded in 1952, provides both regional less-than-truckload (“LTL”), truckload and specialized truckload services primarily in Manitoba and Ontario operating a fleet of approximately 660 trucks and 1,300 trailers through a network of 34 owned and leased terminals, employing over 1,500 employees and 140 contract owner operators.
“This is one of those acquisitions that simply does not come along very often. As I have often articulated we do not acquire companies just for growth. They must be strategic to our business and meet our investment criteria. This Transaction passed both of these tests and of course having the balance sheet and resources available to complete a transaction of this size is an essential component of any acquisition,” said Mr. Murray K. Mullen, Chairman and Chief Executive Officer. “Trucking, and particularly the LTL segment of the transportation industry, has been and will continue to be an important element of the Canadian economy. Acquiring a brand name company like Gardewine will not only provide Mullen Group with a potential new growth opportunity, it will diversify our overall business, adding to our Trucking/Logistics segment during a time when the energy sector in western Canada is facing some cyclical headwinds. Diversification is truly one of the overall strengths of our organization,” added Mr. Mullen.
Mullen Group expects the Transaction will contribute additional annual revenue in excess of $225.0 million and will be immediately accretive to Mullen Group shareholders. Currently Gardewine generates margins that are lower than Mullen Group’s existing Trucking/Logistics segment, however management believes that once synergies are realized, accompanied by focused capital allocation initiatives, margins will improve and compare more favourably with existing business units in the segment.
Strategic Rationale:
Gardewine is a stable, profitable well managed business;
the acquisition will expand the geographic coverage of Mullen Group’s network of regional LTL business into Manitoba and Ontario. With this acquisition, Mullen Group will own and operate five regional LTL businesses in Canada allowing it to provide enhanced services to all customers;
the acquisition is expected to be accretive, adding approximately $25.0 million in annual operating income, with the potential to increase as synergies are realized;
the Transaction includes 23 owned terminals valued at approximately $40.0 million;
the acquisition is expected to diversify Mullen Group’s current revenue stream. Based on current forecasts and budgets, Mullen Group’s Trucking/Logistics segment is expected to grow from 40% of overall revenue to approximately 50% in 2015;
the acquisition will be accretive on various financial metrics, providing support to Mullen Group’s dividend during a time when the oil and natural gas industry in western Canada is expected to experience a cyclical downturn due to low commodity pricing; and
the acquisition represents an effective use of excess cash on Mullen Group’s balance sheet.
Gardewine Key Metrics:
Area of Operation: Gardewine delivers to over 500 communities in Manitoba and northern Ontario along with Saskatchewan and Alberta.
Services Provided: Gardewine’s primary service offering is LTL General Freight hauling. In addition, Gardewine provides a wide range of specialized trucking services including Dedicated, Deck and Bulk hauling.
Operating Assets: 660 power units of which 520 are company owned and 140 are owner operator units. 1,300 trailers which include straight vans, reefer units, decks and specialized bulk hauling trailers.
Terminal Network: Gardewine operates from a terminal network of 23 owned, 11 leased and nine partner sites.
Personnel: 1,500 people of which 750 are drivers and 750 are warehouse, dock, maintenance, operations and administrative personnel.
Financial and Legal Advisors:
Mullen Group received financial advice from TD Securities Inc. and legal advice from Burnet, Duckworth & Palmer LLP. The securityholders of Gardewine received financial advice from CIBC World Markets Inc. and legal advice from Stikeman Elliott LLP.
Government Approvals:
The Transaction is subject to various closing conditions customary for transactions of this nature, including approval by the Canadian Competition Bureau and Transport Canada.
Mullen Group is a company that owns a network of independently operated businesses. Mullen Group provides a wide range of specialized transportation and related services to the oil and natural gas industry in western Canada and is one of the leading suppliers of trucking and logistics services in Canada – two sectors of the economy in which Mullen Group has strong business relationships and industry leadership. Mullen Group provides management and financial expertise, technology and systems support, shared services and strategic planning to its independent businesses.
Mullen Group is a publicly traded corporation listed on the Toronto Stock Exchange under the symbol “MTL”. Additional information is available on our website at www.mullen-group.com or on SEDAR at www.sedar.com.
Advisories:
This news release includes certain statements regarding Mullen Group’s future plans and operations with respect to the Transaction, and contains forward-looking statements that we believe allow readers to better understand our business and prospects. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends”, “strategy” and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this news release contains forward-looking statements and information concerning: the anticipated benefits of the acquisition of Gardewine to Mullen Group (including its shareholders), including anticipated synergies and other matters set forth under “Strategic Rationale”, anticipated accretion levels, anticipated incremental revenues, operating income and the description of the assets and other business matters expected to be acquired pursuant to the Transaction; the ability of Mullen Group and Gardewine to satisfy the other conditions to, and to complete, the Transaction.
With respect to the forward-looking statements and information concerning the anticipated benefits and completion of the proposed Transaction, Mullen Group has provided such in reliance on certain assumptions that it believes are reasonable at this time, including assumptions as to the ability of the parties to receive, in a timely manner, the necessary regulatory, governmental and other third party approvals, including but not limited to the receipt of applicable approvals from the Canadian Competition Bureau and Transport Canada; the ability of the parties to satisfy, in a timely manner, the other conditions to the closing of the Transaction; and expectations and assumptions concerning, among other things: planned synergies, administrative efficiencies and cost-savings; applicable tax laws; future revenues; and budgeted capital expenditures. The anticipated dates provided may change for a number of reasons, including unforeseen delays in securing necessary regulatory or other third party approvals in the time assumed or the need for additional time to satisfy the other conditions to the completion of the Transaction; margins and exchange rates; that Gardewine’s and Mullen Group’s future results of operations will be consistent with past performance and management expectations in relation thereto; management prepared budgets, forecasts and estimates with respect to revenues, usage rates and margins; and that there are no unforeseen events preventing the performance of contracts, realizing anticipated synergies and benefits or otherwise affecting the anticipated revenues of the acquired business. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Readers are cautioned that the assumptions used in the preparation of such forward-looking information and statements, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Our actual results, performance, or achievement could differ materially from those expressed in, or implied by, these forward-looking statements. We can give no assurance that any of the events anticipated will transpire or occur, or if any of them do, what benefits we will derive from them.
This news release contains the term “operating income” which does not have a standardized meaning prescribed by Canadian generally accepted accounting principles and therefore may not be comparable with the calculation of similar measures by other companies. Operating income is defined as net income before depreciation on property, plant and equipment, amortization on intangible assets, finance costs, unrealized foreign exchange gains and losses, other (income) expense and income taxes. Management relies on operating income as a measurement since it provides an indication of the results generated by Mullen Group’s principal business activities and the performance of its operations prior to depreciation and amortization, financing, or taxation in various jurisdictions. Net income is also an indicator of financial performance; however, net income includes expenses that are not a direct result of Mullen Group’s operating activities. These measures have been described and presented in this news release in order to provide readers with additional information regarding Mullen Group’s liquidity and its ability to generate funds to finance its operations and dividends.
Mullen Group Ltd.
Mr. Murray K. Mullen
Chairman of the Board, Chief Executive Officer and President
403-995-5200
403-995-5296 (FAX)
Mullen Group Ltd.
Mr. P. Stephen Clark
Chief Financial Officer
403-995-5200
403-995-5296 (FAX)
Mullen Group Ltd.
Mr. Richard J. Maloney
Senior Vice President
403-995-5200
403-995-5296 (FAX)
www.mullen-group.com
Photo courtesy of Gardewine Group Inc
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