Trimac to go private too? Analyst guesses ‘yes’
TORONTO — Trimac could be the next of the big trucking income trusts to go back to private business, according to the RBC Capital Markets analyst that covers the giant bulk-tank fleet.
In a communiqué to investors, Walter Spracklin says there is a "high likelihood in (RBC’s) opinion" that the McCaig family which founded the carrier will make an offer to take the company private.
Spracklin bases the prediction on a number of factors, including: A recent drop in Trimac Income Trusts’ unit price; a small public float of shares not already owned by the McGaigs; and of course, the impending change on how trusts are taxed, starting in 2011.
The new federal rules, introduced by the Conservatives in 2006, toughen up the flexible tax system for income trusts, treating them more like traditional corporations. This, say critics, makes it more difficult for trusts to meet expected growth targets given the higher cost of capital.
The news about Trimac comes days after Andlauer Income Fund (ATS) announced it would shed its income trust skin. The man who founded the carrier in 1991, Michael Andlauer, made an offer this week to buy any units he doesn’t already own.
consider switching to a private company
This follows a similar move by TransForce, formerly the largest trucking income fund in Canada, which in May completed its transformation to a corporation.
Contrans, then, would remain one of the last few large trucking trusts in the market. Although he originally bashed the decision by Ottawa to change the tax regime for trusts, CEO Stan Dunford told Today’s Trucking in May that he wasn’t interested in making the switch no matter what the other trucking trusts did.
Dunford said there was no reason to do so because his unit holders (of which he’s the largest) were never interested in rapid growth, which, he adds, isn’t a model income trusts were originally intended for.
As for Trimac, it recently reported lower second quarter numbers than analysts were expecting. However, a 2.3 percent drop from eastern operations (to $29.5 million) was more than offset by its western division’s $49 million in revenue, driven by the strength in energy-based Prairie operations and business in B.C.
Revenue increased in the compressed gases, edibles, and industrial minerals product lines throughout western Canada, which made up for a 24 percent decline in woodchips.
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