XPO Logistics to split into two
Brad Jacobs will split his baby.
The founder, chairman and CEO of transport and logistics giant XPO Logistics Inc. (NYSE:XPO) and his board of directors said late Wednesday that they plan to spin off XPO’s transportation and logistics businesses into two separate companies: XPO’s North American and European less-than-truckload (LTL) and truckload brokerage businesses, which, for now, will be called XPORemainCo, and a newly created company, comprised of XPO’s North American and European logistics units, called NewCo. Permanent names for each company will be chosen at a later date, according to an XPO spokesman.
Jacobs will be chairman and CEO of XPORemain and will become chairman of the NewCo board. XPO President Troy Cooper will serve as XPORemain’s president. The current leaders of the logistics businesses on both continents will continue to serve in “senior positions” with NewCo, XPO said in a statement late Wednesday. The company did not identify any of those leaders or what roles they will play should the spin-off occur. Ashfaque Chowdury runs the company’s North American and Asian logistics businesses. Richard Cawston heads up those operations in Europe.
The transaction is expected to be completed during the second half of next year, XPO said. The company cautioned that there is no assurance that a separation will occur. If the deal is consummated, ecah company will trade independently on the New York Stock Exchange.
“By uncoupling our transportation and logistics segments, we intend to create two high-performing, pure-play companies to serve the best interests of our shareholders,” Jacobs said in the statement.
The new logistics company would become the world’s second-largest contract logistics provider, XPO said. The combination of Deutsche Post DHL’s DHL Supply Chain and DHL Global Forwarding is the largest, according to data from research and consulting firm Armstrong & Associates, Inc.
In the third quarter, the transport segment posted revenue of $2.68 billion, while the logistics segment reported revenue of $1.58 billion.
For many weeks, XPO had been rumored to be shopping its European logistics division, a transaction estimated to be worth around $4.5 billion if consummated. However, in the Wednesday statement, XPO said it concluded that a split of the company and a spin-off of the logistics business would be the best way to unlock shareholder value.
Jacobs has long argued that XPO has been penalized by a “conglomerate’s discount” that has obscured the company’s true market value because it has been perceived as too complex to attach a fair assessment to its operations. Transforming XPO into two “clearly delineated service offerings” is being seen by Jacobs and the board as the best way to clear up the complexity and elevate XPO’s value.
Nearly a year ago, XPO proposed to sell its North American and European transportation and logistics businesses and become a pure-play LTL provider. The strategy was shelved after the COVID-19 pandemic hit. Jacobs would have headed up the remaining unit if the initiative had proceeded and was completed.
It has been long believed that Jacobs was more interested in keeping, and running, XPO’s LTL and brokerage businesses than the logistics unit. XPO got its start in 2011 as a broker. It entered the LTL business in 2015 when it acquired Con-Way Inc for $3 billion. Jacobs has made no secret of the potential he sees in an LTL operation that is pure-play, has little or no debt and can generate enormous efficiencies through the application of advanced information technology.
Shortly before 5 p.m. ET Wednesday, XPO shares were up 2.35% to $112.59 in after-hour trading.
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Source and credits: freightwaves.com // iTrucker / Mario Pawlowski
iTrucker / Mario Pawlowski / itrucker.com