XPO Logistics Inc. (NYSE: XPO) announced Thursday that it has sold its truckload business to Canada's growing trucking concern TransForce Inc. (TSX: TFI) for approximately $558 million in cash.
After XPO bought Con-way Inc. a year ago, Con-way Truckload's operations appeared to many observers to be an odd fit for XPO, which bills itself as the second largest freight brokerage provider in the world.
In February, the Wall Street Journal reported that after evaluating and rejecting bids from three trucking companies, XPO would instead hold onto the unit. "I think we can improve it by integrating it and bringing it lots of new customers from our other service lines,” CEO Bradley Jacobs told a WSJ reporter.
Then TransForce approached XPO about a deal, according to the Wall Street Journal in an article Thursday.
The company said it will use the proceeds from the transaction to pay down debt. It has some $5 billion of outstanding debt after making more than a dozen acquisitions since 2011, including French logistics firm Norbert Dentressangle.
The divested truckload operation encompasses approximately 3,000 tractors, 7,500 trailers and 29 locations.
“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.”
TransForce said in its announcement that the acquisition, being made by a wholly owned subsidiary, "represents an important expansion of TransForce's truckload and logistics services across North America,"
Canadian publication The Globe and Mail noted that "TransForce has long searched for an acquisition that would accelerate its trucking presence in the United States to complement its large scale in Canada." TransForce offers package and courier, less than truckload, truckload, and logistics services.
TransForce said the acquired business is expected to generate annual revenue of approximately $530 million and EBITDA of approximately $115 million in 2016.
The divested operations, which have been reported as part of XPO’s Transportation segment, were expected to generate approximately $10 million of operating income for XPO for the remaining two months of 2016, and depreciation and amortization of approximately $10 million.
XPO noted that it will continue to offer full truckload services to customers in North America through its brokerage network.