XPO Logistics Inc., one of the biggest third-party logistics providers (3PLs) in the U.S., has sold its truckload business to TransForce Inc., a provider of transportation and logistics services, for approximately $558 million in cash, subject to customary adjustments. XPO, based in Greenwich, Conn., will use the proceeds from the transaction to pay down debt. TransForce is based in Montreal, Quebec, Canada.
The divested truckload operation encompasses approximately 3,000 tractors, 7,500 trailers and 29 locations that were part of the October 2015 acquisition of Con-way Inc. XPO will continue to offer full truckload services to customers in the United States, Mexico and Canada through its extensive brokerage network. XPO is also one of the largest freight brokerage providers in the world.
According to Alain Bédard, chairman, president and CEO of TransForce, the acquisition will significantly strengthen TransForce’s presence in the North American truckload landscape with prominent market positions in domestic U.S. and cross-border Mexican freight. “The acquisition complements our existing capabilities and gives us access to a diversified and blue-chip customer base.”
XPO divested its truckload assets to concentrate on the areas considered its core competencies: contract logistics, truck brokerage, less-than-truckload, last mile, intermodal, drayage, expedite and managed transportation, explains Brad Jacobs, chairman and CEO of XPO. “This transaction strengthens our balance sheet and improves our long-term growth profile. In addition to deleveraging, the sale reduces our annual capex requirements, increases our return on capital, and lessens the cyclicality of our operations.”
The divested operations, which have been reported as part of XPO’s Transportation segment, were expected to generate approximately $10 million of operating income for the remaining two months of 2016, and depreciation and amortization of approximately $10 million. XPO will update its financial targets to reflect the transaction when it reports its third quarter results next month.
TransForce expects the acquired business to generate annual revenue of approximately $530 million.