XPO Logistics Inc,
one of the largest providers of storage, freight and last mile services in the United States, plans to split into two separate, publicly listed companies and discontinue its attempts to sell parts of the business.
The company plans to further develop its global contract logistics business while maintaining its freight forwarding and brokerage activities as a separate business, XPO said Wednesday.
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The side business will mark a shift in the growth strategy that the Greenwich, Connecticut-based company pursued between 2011 and 2015, when it built a company through a rapid series of acquisitions that enabled it to become one of the largest logistics service providers, with sales of $16.65 billion last year.
The proposed transaction will not be taxed on XPO shareholders who will hold shares in both companies, the company announced.
The transaction is expected to be concluded in the second half of 2021 under various conditions, including the refinancing of XPO’s debt on terms and conditions to be approved by the Board of Directors. Brad Jacobs will remain President and CEO of XPO and will chair the new company, which will have its own board of directors and management.
The planned demerger follows the strategic review of the XPO launched earlier this year to assess whether one or more business units can be sold or demerged.
Our transport and logistics companies are themselves market leaders in the sector and are already ahead of the competition in key indicators, Jacobs said in an interview. Splitting the company into two pure gambling companies would eliminate what he called the conglomerate discount on our shares by freeing up the considerable value of the shares and would make it easier for investors to compare the performance of the two companies with their competitors, he said.
XPO shares were trading at around $110 on Wednesday afternoon, compared to a low of $40.69 this year at the end of March when the coronavirus pandemic hit the United States.
Brad Jacobs, CEO of XPO Logistics Inc. speaks in an interview in New York in 2016.
Chris Goodney/Bloomberg News
In January, XPO stated that it was examining strategic alternatives and
The Goldman Sachs Group Inc.
& Co. organized four simultaneous auctions for all business units, with the exception of the non-freight division, which combines the freight of multiple customers in one truck.
Mr Jacobs stated at the time that XPO is trading well below our parts volume and at a significant discount to competitors, but that it may not be selling segments either.
The announcement follows a difficult period for the company, including the short seller’s report for 2018, which caused the XPO share price to fall and overshadowed the planned repurchase proposal.
XPO got a lot of interest from potential buyers, Jacobs said on Wednesday, but after the pandemic hit the company, the process only continued a few months ago, when companies interested in the European logistics sector approached the company. After considering the options, XPO decided that the best way to create very significant value, to unlock significant equity value, is clearly to separate the logistics activities, he said.
The expected impact limits XPO’s reach to the transportation sector, where the company is one of the largest U.S. freight forwarders.
According to SJ Consulting Group Inc., XPO is the third largest U.S. company with lower freight volumes until 2019 and, according to the research firm Armstrong & Associates Inc., the second largest provider of ground transportation management and brokerage services.
For more information, see Logistics report
XPO also has a department store to deliver the last mile of bulky and cumbersome items, where demand has increased as people during the coronavirus pandemic ordered more furniture, training and office supplies online. The company’s transportation sector generated revenues of $2.68 billion in the third quarter, about the same as a year earlier.
The boom in e-commerce has also contributed to the development of XPO’s contract logistics business, which provides supply chain logistics services such as warehousing and e-commerce to customers such as IKEA, Boeing Co. and Zara d’Inditex SA.
According to Armstrong & Associates, XPO is the second largest North American provider of storage services per square meter. Quarterly segment revenue was $1.58 billion, up 4.6% from the third quarter of 2019.
Write to Jennifer Smith at [email protected].
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