Package delivery giant UPS has entered into a definitive purchase agreement to acquire Coyote Logistics, a technology-driven, non-asset based truckload freight brokerage company, for $1.8 billion from Warburg Pincus. Founded in 2006, Coyote reported annual revenue of $2.1 billion in 2014. Closing is expected within 30 days, subject to customary conditions and regulatory approvals.
“The brokered full-truckload freight segment is a high growth market and we expect it will continue to outpace other transportation segments,” says David Abney, UPS’s CEO. “The Coyote management team is very excited to become a part of UPS and continue to grow, now with UPS’s support,” adds Jeff Silver, Coyote’s CEO.
The transaction will be financed with available cash resources and through existing and new debt arrangements. The acquisition is expected to be accretive to UPS earnings in 2016.
Coyote arranges customers’ freight shipments on available trucking capacity contracted to members of its large carrier network, numbering more than 35,000 trucking companies. The company specializes in serving the food and beverage, and consumer goods industries, as well as paper and packaging, industrial and retail segments. Following the acquisition and integration of Access America Transport to its network last year, Coyote added services for flatbed segments such as heavy equipment and construction.
During the peak holiday shipping season, UPS often supplements its fleet with contract transportation providers to meet customer demand. Coyote has played a growing role in supporting UPS peak operations over the past few years and the company expects to leverage Coyote’s carrier network even further for this purpose in the future.
UPS has also identified revenue growth and fleet efficiency synergy opportunities by hauling shipments arranged by Coyote using existing UPS backhaul capacity within its tractor/trailer fleet.
In addition to the core profitability of Coyote, UPS expects to realize a run-rate of $100 to $150 million of annual operating synergies, from backhaul utilization, purchased transportation and cross-selling opportunities, says Abney.
Coyote uses a suite of proprietary information technologies that provides transportation management applications. The company also offers several software applications that customers and transportation providers can integrate.
Coyote will operate as a subsidiary of UPS, under Jeff Silver’s leadership.