XPO Logistics announced that it plans to create separate businesses for its brokerage and less-than-truckload operations and divest its European business and its intermodal operation.
The spin-off of brokered transportation services to XPO shareholders would transform the remaining business into a pure-play less-than-truckload company, while the divestitures would simplify the company’s transportation service offerings.
The result will be two focused, publicly traded companies.
The spin-off, XPO said in an announcement, would be a leading platform for tech-enabled truck brokerage services in North America, with a highly efficient digital freight marketplace and access to vast truckload capacity, with complementary, asset-light offerings for last mile logistics, managed transportation and global forwarding. The corporate headquarters are expected to be in Charlotte, North Carolina.
Upon completion of the spin-off, XPO’s North American LTL segment would be a pure-play LTL, the third-largest provider of domestic and cross-border LTL freight shipping, with a network of transportation assets managed by proprietary technology. The corporate headquarters are expected to be in Greenwich, Connecticut.
The company plans to divest its European business through either a sale or a listing on a European stock exchange. In North America, the company is currently under an exclusivity agreement in connection with a potential sale of its intermodal business, which provides rail brokerage and drayage services.
“Our two core businesses of North American less-than-truckload and tech-enabled truck brokerage are industry-leading platforms in their own right, each with a distinct operating model and a high return on invested capital,” said Brad Jacobs, chairman and chief executive officer of XPO Logistics, in a news release. “We believe that by separating these businesses through a spin-off, we can significantly enhance value creation for our customers, employees and shareholders, as we did with our successful spin-off of GXO last year.”
The news comes after a tumultuous 2021 for the less-than-truckload market. UPS got out of the LTL business and Central Freight Lines closed its doors. Knight-Swift got into LTL through its acquisition of AAA Cooper. Transervice Integrated Solutions launched an LTL service and Uber Freight expanded its load-matching into LTL.
XPO expects to complete the planned spin-off in the fourth quarter of 2022, subject to various conditions.
Post-spin-off, the remaining company will be the third largest North American provider of less-than-truckload transportation services, with significant competitive advantages, including its position as one of the few national LTL networks in the United States, 130 commercial truck driver training schools and a company-owned trailer manufacturing facility in Arkansas, according to the announcements. At the end of 2021, XPO’s North American LTL business segment had an integrated network of 291 terminals, approximately 12,000 professional drivers, and approximately 7,900 tractors and 25,800 trailers.
For the full year 2021, the business generated $4.1 billion of revenue, $618 million of operating income and $904 million of adjusted EBITDA, as well as the second best adjusted operating ratio in the LTL industry.
Post-spin-off, the new company will be a tech-enabled truck brokerage platform with a history of high revenue and margin growth, including a revenue CAGR three times faster than the industry growth rate from 2013 to 2021.
The spin-off will inherit XPO’s brokerage automation, giving its customers access to truckload capacity through its XPO Connect digital freight marketplace: 80,000 carriers representing approximately 1 million trucks. The company’s offering will include complementary asset-light services for last-mile logistics, managed transportation and global forwarding.
As of year-end 2021, the proposed spin-off operations included a total of 172 locations and approximately 5,500 employees, with approximately 10,000 customers.
For the full year 2021, the proposed spin-off operations generated a total of $4.8 billion of revenue, $226 million of operating income and $305 million of adjusted EBITDA.