Mid-tier truckers TransForce Inc, Mullen Group and Contrans are looking to broaden their portfolio of specialized, niche services to guard against a return to pricing pressures.
"Deal sizes in waste management, for instance, can be all across the map," said Jason Granger, an analyst with BMO Capital Markets Canada, predicting deals in the $5-$10 million range, rising to $50 million in waste management.
Walter Spracklin, an analyst with RBC Capital Markets, expects TransForce and Contrans to be the chief gainers from acquisitions in waste management -- from garbage collection to landfills.
"It's a pretty good strategy to be going into -- a higher margin business with a little less competition and higher barriers to entry," Spracklin said.
Niche services, which are tough to enter due to their specialised nature and technological requirements, are largely unaffected by spot market pricing, making them attractive investment targets.
As the economy picks up, so trucking should rebound, triggering more competition in truckers' core less-than-truckload (LTT) and truckload (TL) businesses, and again putting pressure on pricing.
Truckers' volumes and prices slumped during the downturn, hurt by low freight demand and trucking overcapacity, pushing even giants like YRC Worldwide close to the wall.
Package and courier and oilfield services are other non-traditional acquisition targets that could boost truckers' revenues over the next year.
TransForce is the only significant Canadian player in a package and courier delivery business dominated by Deutsche Post's DHL and U.S.-based UPS and FedEx Corp.
"Given that DHL has scaled down its operations in the U.S., there may be an opportunity for TransForce's package and courier business to partner DHL in Canada," said BMO Capital's Granger.
TransForce CEO Alain Bedard said last week that a major chunk of next year's C$60 million capex budget would be invested in the package and courier and specialised services sectors. (Reuters)
