Andlauer next in line to go private

TORONTO — A group of managers at ATS Andlauer Income Fund, including founder Michael Andlauer, will make an offer to unit holders in a bid to take the company private.

Andlauer — a specialized electronics and pharmaceutical carrier in Etobicoke, Ont. — is the latest publicly-traded trucking company to shed its income trust status since the federal Conservatives announced in October 2006 that starting in 2011, income trusts will be taxed more like corporations.

Basically, income trusts don’t pay corporate income tax but distribute cash to unit holders who pay income tax on the distributions.

Former income trusts TransForce and Canada Cartage have already gone private, although a U.S. private equity firm acquired the latter.

Andlauer Management Group intends to acquire the 70 percent of ATS units it does not currently own for $79 million, or $11.75 per unit.

It has also struck lock-up agreements with investors and other unitholders to acquire 31 per cent of the company.

"AMG believes this is a compelling offer, made at an attractive premium that will provide unitholders with the opportunity to receive cash proceeds for their investment," the company said in a release.

Andlauer’s attempt to go private could spur
at least one other trucking trust to follow suit.

Full details of the offer will be provided in a take-over bid circular expected to be provided to unitholders by the end of October.

RBC Capital Markets analyst Walter Spracklin, who covers public Canadian trucking companies, says this latest move by Andlauer could spur some of the remaining trucking trusts to follow suit.

He thinks the Calgary-based bulk hauler, Trimac, could be next.

Facing the prospect of refinancing debt in the current downturn makes Trimac Income Fund a next likely candidate for a takeover bid by its founders, the McCaig family, says Spracklin.

This would leave Mullen and Contrans as two of the last trucking trusts in Canada.

While things could have since changed, Contrans CEO Stan Dunford told Today’s Trucking this past summer that he had no intention of trailingthe other carriers down the road to private equity.

He said that he sees no reason to do so because his unit holders (of which he’s the largest) are comfortable with the fact Contrans’ business model doesn’t include rapid growth, which, he explains, isn’t a strategy income trusts were originally intended for.