Canadian trucking company TFI International Inc. TFII-T +2.28%increase wants to move its headquarters south, saying that the new U.S. administration will be great for business. One of its top shareholders is pushing back.
The Montreal-based freight carrier says that it intends to pursue redomiciliation, changing the country where it is legally incorporated to the United States while maintaining its staffing levels in Canada. The shift should be done within nine to 12 months if shareholders approve it, chief executive Alain Bédard told analysts on a call Thursday.
Mr. Bédard said he wants to better align TFI with its commercial presence and shareholder base. About 70 per cent of the company’s operations are currently in the U.S., together with just under half of its investors. He also had some praise for U.S. President Donald Trump’s leadership.
“I really believe that the U.S. is the best place to be in the world in terms of business,” Mr. Bédard said in response to a question about his appetite for acquisitions. “I feel really good about this U.S. economy and I feel really that those guys will do a great job – the new administration. So to me, it’s time to invest in the U.S.”
The move comes as a trade war looms between Canada and the U.S. and highlights the difficulty this country could have in maintaining its corporate bench strength. Mr. Trump is keen on imposing tariffs on imports as a way to force manufacturers and other companies based outside its borders to move there and earn access to the world’s biggest consumer market. He’s also dangling carrots, promising some of the lowest corporate tax rates on the planet.
Last week, Barrick Gold Corp. ABX-T -2.98%decrease said it is also considering redomiciling to the U.S. from Canada and that, under theTrump administration, it could happen sooner rather than later. Chief executive Mark Bristow told The Globe and Mail’s editorial board that the move would make sense for multiple reasons, including access to a more efficient marketplace and the ability to attract a bigger pool of shareholders.
Quebec will lose a corporate heavyweight if TFI’smove goes through, yet another head-office loss in a province highly sensitive to such changes. Despite suggestions by Mr. Bédard that this is little more than a paperwork exercise, the Caisse de dépôt et placement du Québec, one of TFI’s biggest shareholders, has signalled its unease with the decision. It owns a stake of about 4 per cent.
“The company did not inform us of its intentions, and we will express to them our displeasure,” Caisse spokesperson Kate Monfette said in an e-mailed statement. “Quebec’s interests are always at the heart of our priorities as a shareholder.”
Numerous analysts have predicted that TFI would be one of the big Canadian winners under the new Trump administration. Pro-growth government policies that spur capital investment would be positive for the U.S. trucking market and U.S.-focused trucking companies, notably TFI International as well as the U.S. operations of Andlauer Healthcare Group Inc., according to National Bank.
“TFI’s move towards redomiciliation seems to be driven by the pursuit of a more business- and regulation-friendly environment in the U.S. versus Canada,” said Peter Stefanovich, president of Left Lane Associates, a transportation, logistics and supply chain investment bank focused on the North American freight market.
Mr. Stefanovich said that Murray Mullen, the chairman and senior executive of Mullen Group, an Okotoks, Alta.-based transportation and logistics company, shared thoughts along similar lines last week. On an earnings call with analysts, Mr. Mullen said the one concern in his business currently is the Canadian market, and he questioned how Canada is going to be competitive with the Americans.
“If Canada doesn’t get its act together – and by this I mean the politicians and Canadians – to say, ‘We’ve got to invest and get capital coming into Canada,’ then we’re going to turn our attention to the U.S.,” Mr. Mullen said, according to a transcript.
Mr. Bédard is building out TFI and consolidating the road cargo market, turning what was once a regional player into Canada’s biggest trucking company. The transporter has acquired more than 90 companies over its history and now controls more than 80 operating subsidiaries,including Canpar Express, Loomis Express and Transport America.
The CEO said Wednesday that being an American company would facilitate relations with some customers, particularly for the transport of sensitive goods for the U.S. Department of Defence, for example. He said it would also allow TFI to be part of U.S. stock indexes and boost its American shareholder base.
The company isn’t moving staff as part of the decision, Mr. Bédard said, adding that TFIalready hired the best talent wherever they live.
“We’re not moving people from Canada to the U.S. We’re not doing that. We’re not stupid,” he said, explaining that TFI’s head-office functions are already fairly decentralized. “We have employees in Canada and in the U.S. We have employees in Montreal, Toronto, Calgary, Chicago, Miami et cetera, et cetera.”
On Wednesday, TFI reported net income of US$88-million or US$1.03 a share for its most recent quarter, a one-third drop from the same period a year ago.
On an adjusted basis, earnings before interest, taxes, depreciation and amortization came in at US$315-million or US$1.19 a share, missing analyst estimates. Revenue was US$2.1-billion for the quarter, also shy of expectations.
The company did not give a formal financial forecast for thecurrent year because of uncertainties over inflation, interest rates and other economic conditions. It shares ended the day down 21 per cent, closing at $143.78.
The company has generated free cash flow topping US$750-million for three consecutive years, but it has struggled with weaker demand and stronger competition in recent months. The acquisitions of TForce Freight and Daseke have also generated problems that are dragging on earnings. Both have high costs and ineffiencies that TFI needs to fix, Mr. Bédard said.