XPO Logistics Inc.
plans to split its freight brokerage, European and intermodal businesses apart from its US trucking operation, effectively dismantling the sprawling, multibillion-dollar freight and supply-chain operation that Chief Executive Brad Jacobs built through a decade of acquisitions.
The Greenwich, Conn.-based company, which spun off its contract logistics business last year as GXO Logistics Inc.,
said Tuesday it plans to separate its freight brokerage operation, which matches loads from shipping customers to available trucks, into a separate publicly traded company. XPO shareholders would hold shares in that separate business under what XPO said is intended to be a tax-free distribution.
The company, one of the largest logistics operators in North America, also plans to sell its North American intermodal business, which uses trucks and rails to move shipments, and to exit its European business through a sale or through a separate share listing in Europe.
XPO is currently under an exclusivity agreement to sell the intermodal business but declined to name the potential buyer.
“Our experience is that customers want high levels of service and they want pure-plays, just as shareholders want pure-plays,” Mr. Jacobs said. Most of XPO’s investors, he said, “are highly focused on our LTL business and simply not giving us credit for our best-in-class truck brokerage business.”
The company expects the aggregate value of shares in the two newly split companies to exceed that of XPO’s stock if the companies remained combined. XPO’s shares currently trade at a “conglomerate discount,” Mr. Jacobs said.
XPO expects to complete the spinoff by the fourth quarter, subject to various requirements such as refinancing its debt with board approval.
The actions would leave XPO with its North American less-than-truckload segment, a major operator in a sector in which companies handle shipments from multiple customers on the same truck. That business, which it acquired in 2015, reported $4.1 billion in revenue last year with an operating profit of $618 million through a network of nearly 300 terminals and about 12,000 drivers.
XPO shares closed Tuesday at $61.93, up $1.64 but down from their all-time high of $90.78 last August, shortly after the spinoff of GXO.
Mr. Jacobs said the separate trucking and truck brokerage companies can still offer high-quality services as specialists in their operations.
The company learned from the GXO spinoff “that when you have a management team doing one thing and being an inch wide and a mile deep in one line of business, that they’re more focused and fit for purpose to drive growth,” Mr. Jacobs said. “We also learned that by creating a pure-play industry leader, you become easier to understand for investors, and you eliminate the conglomerate discount.”
XPO had counted $17.3 billion in overall annual revenue as recently as 2018 from operations ranging from last-mile delivery in the US to contract logistics in Europe that Mr. Jacobs amassed during a decadelong acquisition binge. The company said it had paused its acquisition drive in 2017 but was prepared to spend about $8 billion to resume consolidating businesses.
Rather than buy businesses, the company in January 2020 hired financial and legal advisors to review “strategic alternatives” for its business divisions as it explored potential sales or spinoffs.
XPO started unwinding business units last year when it spun off the warehouse and distribution business that is now GXO in August. That began a turn away from an aggressive mergers-and-acquisition strategy that took in 18 companies, starting with the purchase of a small expedited-delivery business in 2011.
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