A battle is brewing over the future of Vitran as a minority shareholder seeks to unseat the current board of the struggling less-than-truckload operator.
Halifax, Nova Scotia-based investor George Armoyan, whose investment firm Clarke owns 6.2 percent of Vitran, wants the company to sell part of its operations.
In an Oct. 8 letter to Vitran filed with the U.S. Securities and Exchange Commission, Clarke threatened measures to replace Vitran’s board of directors. “To be blunt, Clarke does not have faith in the board,” the company said, adding the directors turned Vitran “from a profitable company into a money-loser.”
Toronto-based Vitran rejected Clarke’s proposals, calling them “self-serving and disingenuous” and noting Clarke owns Clarke Transport, a Canadian LTL carrier.
With operations across Canada and in 34 U.S. states, Vitran is the 12th largest LTL carrier in North America by revenue, according to SJ Consulting Group data. The company’s revenue increased 19.8 percent in 2011 to $805.6 million and 13 percent in 2010 from a recession-era low mark of $585.3 million in 2009. LTL operations accounted for $686 million of that total revenue last year, and $362.4 million in revenue in the first half of 2012, according to financial reports.
Since 2008, however, Vitran has had cumulative annual net losses totaling $129.4 million, with a $14 million net loss last year and a $40.2 million loss in 2010. Altogether, Vitran lost $9.9 million in the first six months of 2012 on $420.9 million in total revenue, with all of the net loss stemming from LTL operations.
The company has expanded in the U.S. through the acquisition of several carriers, including Milan Express, and now has 107 U.S. and 24 Canadian terminals.
In the Oct. 8 letter, Clarke blamed Vitran’s U.S. strategy for years of losses. “Each U.S. acquisition ... has been followed by worse operating results,” the company said.
Clarke proposed selling Vitran’s profitable supply chain division, using the proceeds to repay $32.9 million in debt and expanding its profitable Canadian LTL arm. “There is tremendous opportunity at Vitran to unlock the Company’s true value and put the Company on sounder financial footing,” Clarke wrote.
Vitran fired back on Oct. 10, saying Armoyan sought a seat on Vitran’s board and was rejected for, among other things, lacking U.S. LTL industry experience. Many of Clarke’s suggestions, Vitran said, “simply show a lack of understanding of the company’s less-than-truckload services business in the United States.”
According to Vitran, Armoyan met with Chairman Rick McGraw on Sept. 19 and requested he be appointed to the company’s board.
Armoyan also suggested the larger LTL player become “the driver behind a consolidation” of the LTL trucking industry in Canada, Vitran says.
Vitran said “that Mr. Armoyan's relationship with Clarke Transport,” a direct competitor in Canada, “disqualified Mr. Armoyan from serving as a director.”
Syrian-born Armoyan is a developer and “activist investor” who serves on the boards of several companies, including businesses invested in by Clarke. He is currently president and CEO of Clarke and president of Geosam Capital, a Halifax-based investment firm with offices in Montreal and Toronto.
Clarke’s companies include LTL carrier Clarke Transport, truckload carrier Clarke Road Transport and Clarke Shipping, a container shipping line with one ship. The freight transportation division had about $41 million in revenue in the second quarter, and $89 million in the first half of 2012, according to SEC filings.
The LTL carrier has 15 terminals across Canada, from Halifax to Vancouver.
Vitran said it has its own map back to profitability, and in previous reports has stressed the importance of its Supply Chain Operation division to strengthening its LTL business.
In its Oct. 10 statement, Vitran also said it had established a special committee to “oversee various matters to improve the balance sheet of the company.”
The company also said it is searching for a director with U.S. LTL experience. In January, Vitran hired Chris Keylon, a former FedEx Freight executive, as president of its U.S. division, a step that encouraged Stifel Nicolaus analyst David G. Ross. “He has seen how the leading LTL carriers operate and has also experienced the effects of large mergers and integrations,” the analyst said in February.
Clarke also said it was “modestly” encouraged by the hiring of Keylon. “It is too early to tell if this will be a turning point for the company or just another excuse in the quarterly reports,” the company said in its Oct. 8 letter.
Contact William B. Cassidy at email@example.com. Follow him on Twitter at @wbcassidy_joc