The parcel giant expects to complete the $1.025 billion deal by the end of 2024.
RXO entered a definitive agreement to buy Coyote Logistics from UPS for $1.025 billion, according to a news release Sunday.
RXO expects the deal to help diversify and expand its customer base, providing at least $25 million in synergies, according to the company.
The deal could be complete by the end of the year, but Coyote will continue its ties with UPS through a contract with RXO that runs through January 2030.
The deal will diversify RXO and help reduce deadhead miles, CEO Drew Wilkerson said on a Monday conference call.
That’s because there’s minimal overlap between the two businesses’ largest customers: Coyote’s top two verticals are food and beverage and transportation, while RXO’s top clients are in retail, industrial and manufacturing, he said.
“This is a transformational deal for RXO,” Wilkerson said, adding the acquisition will make the business the third-largest freight brokerage in North America.
For UPS, selling the subsidiary allows the parcel giant to focus on its core business, CEO Carol Tomé said in a news release. That echoed commentary she gave in January during a Q4 earnings call that alluded to UPS’ interest in potentially offloading the business, following an $84 million impairment charge related to Coyote.
In 2021, UPS similarly broke off its LTL business unit when it sold its UPS Freight division to TFI International.
UPS acquired Coyote in 2015 for $1.8 billion, but executives noted in January how the highly cyclical business and excess capacity in the market created ongoing issues.
Synergies represent about 30% of Coyote’s 2023 earnings before interest, taxes, depreciation, and amortization (EBITDA), a sizable amount, according to Jamie Harris, RXO’s CFO. He also noted that RXO has a strong, continuous improvement mindset, looking at ways to reduce costs in its own company. He suggested that approach will continue to play out across the board following the acquisition.
“This is an opportunity,” Harris said. “We’re going to see processes from both companies. We’ll be able to take the best of both worlds.”
To complete the deal, equity investments will come from RXO shareholders MFN Partners and Orbis Investments, totaling $550 million. Debt will also contribute
As part of the deal, RXO will also acquire “certain assets used to conduct haulage, dedicated transport and warehousing services in the United Kingdom,” according to a securities filing.
Once the transaction closes, Coyote employees will become part of RXO, and no decision has been made about any further changes, a company spokesperson also said in an email to Trucking Dive.
“The addition of Coyote will significantly increase our scale,” Wilkerson said, noting it will also provide further opportunities. “Our larger scale will allow us to purchase transportation even better than we currently do.”
In a similar move, digital freight platform Transfix recently sold its brokerage to NFI and pivoted, landing the 3PL as its first third-party customer for its transportation management software.
RXO’s Wilkerson said they expect the industry will further consolidate in the next four or five years.
“Customers are going to want to do business with large brokerages that are financially stable, that have built good relationships, that have a strong carrier base, they’re going to be the winners in this,” he said. “And we think that today’s move only positions us even better to continue to go out there and take market share in this market.”
Source: https://www.truckingdive.com/news/rxo-to-acquire-ups-coyote-logistics-for-over-one-billion/719582/
The strong year in air cargo has been credited to ecommerce – but “traditional” air cargo might also see a bump next year, according to Xeneta.
Air cargo’s strong seasonal fourth quarter (Q4) appears to have peaked, with tonnages and rates dropping slightly in the second full week of December, including from Asia...
Since the beginning of 2024, the total volume of goods transported through seaports is estimated to have increased by approximately 14%, reaching over 570 million tons. Among...
Major disruptions in the Red Sea have triggered one of the largest realignment of global shipping routes in recent years, with Asia-Europe maritime capacity plunging by 33...
Carriers are thought to have increased rates by about 10%, both for long-haul and intra-Asian routes, according to Dimerco.
The air cargo market is unusually busy as 2024 draws to a close as shippers have been exporting goods out of China to the US ahead of expected new tariffs in January.
Global air cargo average spot rates rose by a further +4% in the first full week of December to a 2024 high of US$3.30 per kilo
With rate and surcharge increases looming from both FedEx and UPS, businesses that need bulkier products delivered are going to feel the sting
A “very strong Q4” for air cargo will likely turn into a record peak season, according to IATA economist Ghislaine Lang, but the growth will be hard to sustain next year.
A combination of strong heavy-lift and outsized cargo demand, tight air cargo capacity and surging air freight rates has led to a modal shift in shipments from air to multipurpose...
ALS