XPO Logistics Acquires Con-way for $3 Billion

Sept. 10, 2015
Acquisition will make 3PL XPO Logistics one of the biggest LTL providers in the U.S. market.

XPO Logistics Inc., one of the 15 biggest third-party logistics providers (3PLs) in the U.S., has entered into a definitive agreement to acquire Con-way Inc. for $3 billion. The transaction will make XPO one of the largest less-than-truckload (LTL) providers in North America, and will expand the company’s global contract logistics platform. XPO will also capitalize on synergies from the combination with Con-way’s managed transportation, truckload and freight brokerage businesses. Interestingly, Con-way’s 2014 revenues of $5.7 billion are more than twice that of XPO’s revenues of $2.3 billion.

Headquartered in Ann Arbor, Mich., Con-way is a Fortune 500 company with a transportation and logistics network of 582 locations and approximately 30,000 employees serving over 36,000 customers. For the full year 2015, consensus analysts’ estimates for Con-way are $5.7 billion of revenue and $528 million of adjusted EBITDA. The transaction is expected to be substantially accretive to XPO's earnings in the first 12 months.

Upon completion of the deal, Con-way will merge with a subsidiary of XPO, becoming a wholly owned subsidiary of XPO. All of the acquired operations—namely Con-way Freight, Menlo Logistics, Con-way Truckload and Con-way Multimodal—will be rebranded as XPO Logistics.

Bradley Jacobs, chairman and CEO of XPO Logistics, will retain these positions and lead the combined company. Douglas Stotlar, Con-way’s president and CEO, will serve in a limited role as an independent advisor to the combined company through the first quarter of 2016.

The transaction is expected to close in October 2015, subject to the satisfaction of customary conditions, including regulatory approvals. The boards of directors of XPO and Con-way have unanimously approved the transaction.

Pointing out that the LTL industry represents a $35 billion market, Jacobs notes, “LTL is a non-commoditized, high-value-add business that’s used by nearly all of our customers.” XPO will run Con-way with “a fresh set of eyes as part of our broader offering. Importantly, we’ll gain strategic ownership of assets that will benefit our company and our customers during periods of tight capacity.

XPO plans to offer LTL services to its 16,000 customers in North America, with capabilities for time-definite service. Nearly all of XPO’s current brokerage customers require LTL transportation, and the majority of Con-way’s 36,000 customers can utilize multiple XPO services.

The combination will expand XPO’s global contract logistics platform by 22 million square feet, to a total of 151 million square feet, and will add 160 facilities to the footprint. The acquired operations serve customers in verticals such as high tech, healthcare and retail, complementing XPO’s expertise in aerospace, retail, telecom, agriculture, chemicals and food and beverage. The combination will strengthen XPO’s position in the e-commerce sector, which is projected to grow at a pace of 18% to 21% annually. XPO and Con-way both have e-fulfillment contract logistics platforms in North America and Europe.

The addition of Con-way’s truckload fleet, including dedicated carriage, will increase cross-border Mexico services, which include intermodal, truck brokerage and expedite. Cross-border growth is projected to outperform industry growth, due to the near-shoring of manufacturing.

The combination will grow XPO’s global ground transportation network to approximately 19,000 owned tractors and 46,000 owned trailers, 10,000 trucks contracted through independent owner operators, and access to more than 50,000 independent carriers. In North America, XPO will have approximately 11,000 owned tractors and 33,000 owned trailers, 6,000 trucks contracted through independent owner operators, and access to more than 38,000 independent carriers.

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