XPO Logistics will now focus on trucking as it spins off and sells other businesses
March 10, 2022: -XPO Logistics announced after the closing bell Tuesday it will become a trucking company solely, spinning off its high-tech truck brokerage business into a separate publicly traded firm.
“This is one great company that becomes two great companies.” XPO Chairman and CEO Brad Jacobs told CNBC. “There’s a large universe of investors who want to invest in a pure-play like LTL that’s asset-based with a high return on capital and levered to the ongoing industrial recovery.”
He added that “There’s a separate universe of investors who want to invest in an asset-light, tech-enabled truck brokerage platform that the spinoff will be.”
The leftover trucking business will retain current management, including Jacobs, the ticker symbol XPO and headquarters in Greenwich, Connecticut. XPO will focus solely on LTL, where the company gets 33% of its revenue.
LTL trucking, allowing multiple customers to ship goods in the same truck, has become surging in demand during the global supply chain disruption caused by the Covid pandemic as total truckload capacity has become more expensive and difficult for companies to find.
“We’ve managed the LTL business very well. We generated more than $3 billion in net cash and improved margin by 910 bps since we bought the business. It’s going to be even more focused post-spin,” Jacobs said.
The truck brokerage business, which includes last-mile delivery, freight forwarding, and managed transportation, is expected to begin trading under a new name by the end of 2022. It will have a separate management team, with headquarters in Charlotte, North Carolina.
XPO has an exclusive agreement with a potential buyer for its intermodal business that ships containers. Therefore, if that deal does not close, XPO said the container shipping business would be included in the spinoff.
The company will divest its European business, including trucking, truck brokerage, and other services, through a sale or a listing on a European exchange.
Tuesday’s announcement departs from XPO’s growth strategy between 2011 and 2015, including the 2015 acquisition of LTL trucker Conway for $3 billion.
In March 2021, XPO announced it would spin off its contract logistics business into a separate publicly-traded company called GXO. Those shares began trading back on August 2. On Tuesday, including a nice move higher in regular trading, GXO has gained roughly 17% since then compared to a nearly 4% decline in the S&P 500 over that same period.
“We learned from the GXO spin that when you have a management team doing one thing, they’re focused and fit for purpose to drive growth,” Jacobs said. “We learned that by creating a pure-play industry leader, you become easier to understand for investors and eliminate.”
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