TFI’s headquarters in Montreal. (TFI International)
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TFI International’s ongoing acquisition spree is set to accelerate in 2025, with substantial truckload and less-than-truckload deals on the horizon, according to CEO Alain Bédard.
Montreal-based TFI ranks No. 4 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
Any substantial truckload mergers or acquisitions would take place before the promised spinoff of TFI’s truckload division, Bédard told analysts on the company’s second-quarter 2024 earnings call July 25.
Bédard said there would be no truckload deals of size this year, but the division needs to be bigger before the planned spinoff. TFI watchers could expect the company to beef up its truckload operations in 2025 and 2026, he said.
As a result, the timeline for the spinoff, previously expected to take place next year, may be slipping.
TFI also plans to bulk up the LTL unit, particularly in the U.S., the company’s top executive said.
“At some point, we have to take action. Longer term, we have to be a larger player in the U.S. LTL space,” Bédard said. TFI ranks No. 8 on TT’s list of the top LTL carriers in North America.
Expansion of the unit, which Bédard told analysts needed to go on a diet when it comes to costs, was likely to take place once some of the company’s debt is paid down, he said. TFI had $3.25 billion in debt at the end of the most recent quarter.
Part of that debt relates to TFI’s largest acquisition in 2023. The company paid $1.1 billion for flatbed specialist Daseke Inc. in a deal that closed April 1. Daseke — TT’s top-ranked flatbed carrier in North America — added about 4,900 tractors and 11,000 flatbed and specialized trailers to TFI’s truckload division.
Bédard is confident TFI will have the funds to expand its shopping spree.
“TFI is a free cash flow machine,” he boasted during the earnings call.
In the three months that ended June 30, TFI’s free cash flow was $151.4 million, bringing its six-month total to $288.6 million. Free cash flow is the amount of cash a company generates beyond its working capital needs, including servicing debt payments. In the most recent 12 months, TFI’s free cash flow was $1.05 billion.
Free cash flow is a metric that takes account of acquisitions, so the cost of Daseke and TFI’s other 11 takeovers in 2023 already is included, as are the seven deals the company inked in the first seven months of 2024.
TFI also plans to bulk up the LTL unit, particularly in the U.S., the company’s top executive said. (TFI International)
The most recent acquisition was a Canadian tuck-in truckload deal for Saint-Georges de Beauce, Quebec-based Groupe CRS Express, which specializes in flatbed, enclosed trailer and oversize transportation.
In June, TFI acquired Entreposage Marco Inc. for an undisclosed sum, its second of a food-grade liquids hauler in 2024. Tank truck carrier Entreposage specialized in transporting edible products, including various oils, liquid cream yeast, sweeteners and fruit juices.
A month earlier, TFI acquired truckload carrier Transport MJ Lavoie for an undisclosed sum. St-Remi, Quebec-based MJ Lavoie specializes in hauling truckloads of compostable and recyclable materials, along with residential waste. That includes metal, moss, dead leaves, residential waste and wood, as well as wood chips.
As a result of the truckload acquisitions, TFI’s fleet size ballooned.
In Q2, TFI’s Specialized Truckload unit posted an average truck count of 6,785, a jump of 73.4% year on year from 3,914 a year earlier, while the unit’s trailer count soared 98.1% to 20,613 from 10,404.
Also, TFI’s Canadian LTL unit ran an average of 922 vehicles in the most recent quarter, up 17.9% compared with 782 in the same period in 2023.
The company’s biggest deal so far this year was the purchase of Hercules Forwarding, an LTL carrier with an emphasis on intra-U.S. and U.S.-to-Canada cross-border transportation. The company operates 31 terminals and has 210 trucks, close to 600 trailers and about 75 containers.
One of TFI’s main focus areas for 2024 is a revamp of its U.S. LTL operations, specifically the TForce Freight business bought from UPS in 2021.
“We’re too fat. We’ve got too many costs. The way we’re going to win is to be lean and mean,” Bédard told analysts July 25.
“Let’s go on a diet. That’s the only way we’re going to cut costs,” he said, adding that TForce Freight is running an excess of capacity in the region of 35%.
Bédard expects sales of LTL real estate by the end of 2024 as a result, telling analysts that talks were ongoing for a California divestment that would then see the buyer knock down the terminal.
“If we buy another LTL company, they may have too much capacity,” he said. “So, that’s why we’re reducing capacity now. We’re not waiting.”