January 26, 2021

On Tuesday markets were mostly down somewhat as the S&P 500 fell a modest 0.15% while Toronto was down 0.7%.

TFI International finished the day up 3.0% at $88.66. First thing this morning it was as high as $98.75. At that price it was up fully 50% from Friday’s close. Truly mind-boggling for a mature trucking company to jump that much on an acquisition. I reduced my position further  at a price above $97 further but sill have a reasonable exposure to the company. I may have sold too much but I just thought the gain was over-done. Great company but I am satisfied to take some money off the table.

Yesterday I was perplexed by the what they meant by cash-free when they said:  UPS Freight was being acquired “for US$800 million on a cash-free, debt-free basis before working capital and other adjustments”. Looking at the presentation that I have now found on the TFI web site I see the transaction will  be made with all-cash and is $800 million on an enterprise value. What this apparently means is that it comes with no acquired cash and no existing debt.  The presentation also indicates that TFI will maintain various contracts and relationships with UPS for up to 5 years. This freight business was integrated into UPS and can’t simply be entirely carved out immediately and it appears there is substantial handing off of freight between UPS and the freight division and also integrated computer systems. The transaction is expected to close in Q2.

The presentation is here.

In any case, the market certainly loves this deal.

Toll Brothers was up 3.3% to $52.99.

Penny stock Ceapro was up 13% to 79 cents.

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