XPO Logistics has sold its North American truckload business to TransForce for $558m and will use the proceeds to pay down debt.
The business formed part of XPO’s $3 billion acquisition of logistics provider Con-way in October 2015 and takes place as the company narrows its focus on areas where it is a leader in the industry, including contract logistics, truck brokerage, less-than-truckload, last mile, intermodal, and drayage.
Bradley Jacobs, chairman and CEO of XPO Logistics, said: “In addition to deleveraging, the sale reduces our annual capex requirements, increases our return on capital and lessens the cyclicality of our operations.”
For TransForce, it means getting hold of the 19th largest asset-based truckload carrier in the US with an operating history of 60 years, along with its workforce.
It will also gain a presence in the cross-border Mexico freight corridor, with 35% of revenue coming from the country. Currently all of TransForce’s revenue by geography is sourced from Canada (62%) and the US (38%).
The asset base of the business being purchased includes approximately 3,000 tractors, 7,500 trailers and 29 locations that were part of the October 2015 acquisition of Con-way.
Canadian-listed TransForce will add a new C$500m ($375m) debt liability to make the acquisition.
On announcing the Con-way acquisition last year, Jacobs told Automotive Logistics that while the company would not disclose details of its business mix by vertical industry, the automotive sector would “continue to be one of the more important customer verticals we serve at XPO”.
TransForce expects the business to generate annual revenue of approximately $530m and earnings before tax, depreciation and amortisation of approximately $115m in 2016. It will grow the company’s annual truckload revenue to nearly $850m.
Meanwhile XPO, as the second largest freight brokerage provider in the world, will continue to offer full truckload services to customers in the US, Mexico and Canada.
