XPO Logistics Inc.
plans to separate its freight brokerage, European and intermodal businesses from its U.S. trucking operations, effectively dismantling the sprawling multibillion-dollar freight and supply chain operation that chief executive Brad Jacobs has built over a decade of acquisitions.
The Greenwich, Conn.-based company that spun off its contract logistics business last year as GXO Logistics Inc.,
said Tuesday it plans to spin off its freight brokerage business, which matches shipping customer loads to available trucks, into a separate, publicly traded company. XPO shareholders would hold shares in this separate business as part of what XPO said was a tax-exempt distribution.
The company, one of North America’s largest logistics operators, also plans to sell its North American intermodal business, which uses trucks and trains to move shipments, and exit its European business through a separate sale or listing in Europe.
XPO is currently under an exclusive agreement to sell the intermodal business but declined to name the potential buyer.
“Our experience is that customers want high levels of service and they want pure games, just as shareholders want pure games,” said Jacobs. Most of XPO’s investors, he said, “are heavily focused on our LTL business and simply don’t give us credit for our best-in-class truck brokerage business.”
The company expects the total value of the shares of the two newly split companies to exceed that of XPO’s shares if the companies remained combined. XPO shares are currently trading at a “conglomerate discount,” Mr. Jacobs said.
XPO expects to complete the spin-off by the fourth quarter, subject to various requirements such as refinancing its debt with board approval.
The shares would leave XPO with its North American LTL segment, a major operator in an industry in which companies handle multiple customer shipments on the same truck. The company, acquired in 2015, posted revenue of $4.1 billion last year with an operating profit of $618 million thanks to a network of nearly 300 terminals and about 12,000 drivers .
XPO shares closed at $61.93 on Tuesday, up $1.64 but down from their all-time high of $90.78 last August, shortly after the GXO spin-off.
Mr. Jacobs said separate trucking and truck brokerage companies can always deliver high quality services as specialists in their operations.
The company learned from the GXO spin-off “that when you have a leadership team doing one thing that’s an inch wide and a mile deep in a line of business, they’re more focused and fit to drive growth,” Mr. Jacobs said. “We also learned that by creating a pure-play industry leader, you become more understandable to investors and eliminate the conglomerate discount.”
XPO had $17.3 billion in global annual revenue as recently as 2018 from operations ranging from last-mile delivery in the United States to contract logistics in Europe that Mr. Jacobs amassed over the course of 2018. a decade-long acquisition spree. The company said it paused its acquisition campaign in 2017, but was prepared to spend about $8 billion to resume consolidating its business.
Rather than buying businesses, the company in January 2020 hired financial and legal advisers to review “strategic alternatives” for its business divisions as it explored potential sales or spinoffs.
XPO began untying business units last year when it spun off the warehouse and distribution business that is now GXO in August. It began to shift away from an aggressive M&A strategy that involved 18 companies, starting with the purchase of a small expedited delivery company in 2011.
Write to Lydia O’Neal at [email protected]
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