XPO Logistics said the sale of its truckload operations includes approximately 3,000 tractors, 7,500 trailers and 29 facilities it acquired in its October 2015 purchase of Con-way Inc., and proceeds will be used to pay down debt.
TransForce Inc., Canada’s largest trucking carrier, has purchased the full truckload (TL) transportation business of XPO Logistics, Inc. for $558 million in cash, the companies said in separate statements Thursday.
The deal for XPO’s truckload operations includes around 3,000 tractors, 7,500 trailers and 29 facilities it acquired in its $3 billion purchase of Con-way Inc. in October 2015. The Greenwich, Conn.-based third-party logistics provider said proceeds from the sale will be used to pay down debt.
The news was somewhat of a reversal for XPO, as Chairman and Chief Executive Officer Brad Jacobs told the Wall Street Journal in February his company planned to keep the former Con-way truckload division after receiving final bids from three different trucking companies.
Based in Montreal, Quebec, TransForce is a publicly traded company on the Toronto Stock Exchange, offering full TL, less-than-truckload (LTL), parcel delivery, and customized logistics services to the United States and Canada.
XPO’s truckload business, headquartered in Joplin, Mo., which had been in operation for more than 60 years prior to its purchase, offers integrated point-to-point dry-van TL transportation services across the U.S., and is one of the largest service providers of cross-border trucking into Mexico, according to TransForce.
The company said it expects the acquisition to generate annual revenues of around $530 million and earnings before interest, taxes, debt and amortization (EBITDA) of $115 million in 2016. Combined with TransForce’s current U.S.-based TL operations, the company expects to have an annual U.S. TL run rate revenue of nearly $850 million.
The purchase will be partially financed by TransForce’s existing revolving credit facility and a new $500 million Canadian (U.S. $373.25 million) acquisition facility that was fully underwritten by National Bank of Canada and Royal Bank of Canada as co-lead arrangers and joint bookrunners.
“This acquisition significantly strengthens TransForce’s presence in the North American truckload landscape with prominent market positions in domestic U.S. and cross-border Mexico freight,” TransForce Chairman, President and CEO Alain Bédard said of the deal. “The acquisition complements our existing capabilities and gives us access to a diversified and blue-chip customer base.
“We have acquired a high quality truckload business with a rich heritage and demonstrated solid operating and financial performance,” he added. “We believe we are investing into the truckload space at a critical time and are well-positioned to benefit from future growth opportunities.”
The divested operations, previously 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, according to XPO. The company said it will update its financial targets to reflect the transaction when it reports its third quarter results on Nov. 2, 2016.
Jacobs said the company will continue to offer full TL brokerage services to its customers in North America.
“TransForce is getting the 19th largest asset-based truckload carrier in the U.S., a highly experienced workforce, and a presence in the cross-border Mexico freight corridor,” Jacobs said. “We divested these assets to concentrate on growing our value to customers in the areas where we’re leaders in the industry: contract logistics, truck brokerage, less-than-truckload, last mile, intermodal, drayage, expedite and managed transportation.
“This transaction strengthens our balance sheet and improves our long-term growth profile,” he added. “In addition to deleveraging, the sale reduces our annual capex requirements, increases our return on capital, and lessens the cyclicality of our operations.”
J.P. Morgan served as financial advisor to XPO Logistics in the transaction, and Scudder Law Firm, P.C. acted as legal advisor.
NEWS FLASH: TransForce buys XPO’s truckload business for $558m
