Celadon Group, Inc. (OTCMKTS: CGIP) announced late this afternoon that it “has disposed of its A&S Kinard and Buckler Transport subsidiaries” in an all cash transaction that was effective on March 31. Celadon also announced it had entered into a Fifteenth Amendment to its credit facility.
According to a Celadon press release, the sale is a continuation of its strategic plan to “streamline operations, reduce total debt and focus on its core business.” The companies were purchased by Day & Ross Freight, a subsidiary of McCain Foods Limited.
Through its subsidiaries, Indianapolis-based Celadon provides long-haul, regional, local, dedicated, intermodal, temperature-protect and expedited freight service across the United States, Canada and Mexico. Celadon is one of North America’s 20-largest truckload carriers as measured by revenue. Celadon Logistics Services provides freight brokerage services, less-than-truckload (LTL) services, as well as supply chain management solutions, including warehousing and dedicated fleet services.
Celadon acquired A&S Kinard and Buckler Transport in 2014-15. The business units had operated largely on a stand-alone basis within Celadon, “primarily providing regional, dedicated and specialized transportation services in the Northeast and Mid-Atlantic regions.”
In 2018, the two companies generated revenues of approximately $160.4 million, “excluding certain operations that were not included in the transaction.” According to the Celadon release, the “gross enterprise value for the transaction was approximately $139.5 million, subject to customary adjustments.” Of that amount, approximately $67.5 million was used to pay down equipment debt and capital leases of A&S Kinard. The balance “was used to pay transaction expenses, to reduce borrowings under [Celadon’s] revolving credit agreement and to provide additional liquidity.”
Commenting on the sale of the two companies, Paul Svindland, Celadon’s Chief Executive Officer, stated, “We appreciate the contributions of A&S/Buckler team over the several years they were part of our Celadon family of companies. They have outstanding businesses and will find a strong fit and home at Day & Ross, which is building a leading dedicated truckload business in North America. We expect that all A&S/Buckler stakeholders – drivers and other employees, customers, and vendors – will experience a smooth transition and a bright future.”
Svindland explained the reasoning behind the sale, stating, “Over the past several quarters, we have been diligently focused on streamlining our business, improving the results of our core North American truckload operations, improving our capital structure and resolving the accounting, litigation and regulatory issues that had arisen under prior management. The sale of A&S/Buckler marks another material milestone toward executing our plan. We anticipate additional announcements in the near-term as we focus on positioning the Company to pay down additional debt, refresh our tractor fleet, complete our financial restatement and audits, and solidify our capital structure.”
On March 29, Celadon and “substantially all of its subsidiaries entered into a Fifteenth Amendment to the Company’s credit facility.” According to the Celadon release, the amendment, provided for the following: a consent framework for the disposition of A&S Kinard and Buckler Transport, “as well as an additional contemplated disposition that is expected to occur by April 15”; a reduction of the “previous pay down requirement and an extension of the pay down date from March 31 to April 15, to align the credit agreement terms with the expected net proceeds and timing” of the sale of the two companies and the “other contemplated disposition;” a “reset of the maximum borrowing amount and maximum outstanding amount available under the credit facility to align with the revised pay down requirement and timing; and “additional funds for liquidity and revised financial covenants through May 24.”
Celadon’s existing credit facility matures on June 29, 2019, and “contains financial and other terms that require a material pay down by April 15,” which Celadon expect to satisfy with the sale of the two companies to McCain Foods Limited. Celadon stated that there may be an “additional amendment or extension by May 24.” According to the Celadon release, the company will use the time from now until May 24 to “continue evaluating, together with its revolving credit lenders, the potential for a long-term extension of the credit facility as well as all available alternatives.”
Day & Ross Freight is a leading Canadian LTL and truckload carrier. Day & Ross was founded in 1950 in Hartland, New Brunswick with one truck that hauled potatoes on a route from New Brunswick to Quebec. McCain Foods purchased majority ownership in Day & Ross in 1965.
McCain Foods is a privately owned company established in 1957 in Florenceville, New Brunswick. It is the world’s largest manufacturer of frozen potato products.