Less-than-truckload carrier XPO announced Wednesday it has begun opening the service centers it acquired from bankrupt Yellow Corp.
XPO (NYSE: XPO) purchased 26 owned terminals and two leased locations from Yellow (OTC: YELLQ) in the estate’s first auction in December. XPO’s $870 million bid for the terminals represented the largest allocation of Yellow’s properties at the time. XPO was not active in a second auction where privately held Estes added five locations to bring its total acquisitions from Yellow to 29 properties. However, the value of those sites ($284 million) is one-third that of XPO’s acquisition.
The three facilities XPO has opened are in the Nashville, Tennessee area; Grand Junction, Colorado; and Nogales, Arizona. The Nashville location has 100 doors and is the first of two sites that the company will open in that market during the second quarter.
“Our first three acquired facilities have launched on schedule, following our landmark investment in our network,” stated XPO CEO Mario Harik in a news release. “With a deeper presence in strategic markets, we are introducing new premium services and expanding our existing offerings, such as our cross-border service with Mexico.”
In total, XPO acquired approximately 2,900 doors from Yellow’s estate, which will complement the roughly 17,000 it was operating prior to the deal. The entirety of the acquisition is expected to produce a 10% to 15% increase in total door capacity as some of the additions are not fully incremental. XPO will be replace existing facilities with larger locations in some markets.
The release said the new space will enhance operational efficiencies and improve linehaul capabilities, ultimately improving service metrics.
On its fourth-quarter call in February, XPO said it planned to open the first 12 locations within three to six months, the next dozen in six to 12 months and the remaining sites in 12 to 18 months. Upgrades, repairs and rebranding need to be performed before the sites can be relaunched into service.
On the February call, management said it had opened a dozen service centers in recent quarters and those sites were accretive within 30 to 60 days. In totality, the acquired terminals will have little impact on the carrier’s operating ratio this year even as depreciation and amortization expenses increase. The sites are forecast to be accretive to earnings in 2025, with the guide assuming incremental margins in the 30% to 40% range.
XPO has been very aggressive in seizing the freight opportunity created by Yellow’s closure.
The company continues to post tonnage gains ahead of most peers despite industrywide declines in weight per shipment. It showed positive volume trends in a first-quarter update provided a month ago, following tonnage and yield growth in the fourth quarter. It has forecast first-quarter yield (excluding fuel surcharges) to again increase by 10% year over year.
On Monday, LTL competitor Saia (NASDAQ: SAIA) said it has opened two new terminals, including a location it acquired from Yellow. It acquired a total of 28 terminals from the estate valued at $244 million.
Roadrunner (OTC: RRTS) announced Wednesday it opened a 75-door facility in Atlanta that was formerly operated by Yellow.
With the three openings, XPO now operates 297 service centers.
