UPS to sell Coyote Logistics business to RXO for $1.025bn
Deal expands RXO’s market position with increased capacity for customers and increased access to freight for carriers
UPS has entered into an agreement to sell its Coyote Logistics business unit to RXO for $1.025 billion.
Based in Chicago, Coyote Logistics is a leading global third-party logistics (3PL) provider, working with 100,000 network carriers and managing 10,000 loads per day, says an official release from UPS.
“As UPS positions itself to become the premium small package provider and logistics partner in the world, the decision to sell our Coyote Logistics business allows an even greater focus on our core business,” says Carol B. Tomé, Chief Executive Officer, UPS.
The transaction is expected to close by the end of the year, subject to regulatory review and approval. Upon completion of the transaction, the company will update its financial outlook, the release added.
The transaction will be funded with a mix of equity and debt including a $300 million equity investment from MFN Partners and a $250 million equity investment from Orbis Investments, two of RXO’s largest shareholders, RXO said in an official statement.
"This acquisition will enhance RXO’s market position, diversify and expand its customer base, and broaden its carrier network. At closing, RXO will be the third-largest provider of brokered transportation in North America."
Drew Wilkerson, Chief Executive Officer, RXO says: "RXO’s highly accretive acquisition of Coyote will immediately increase the scale of our brokerage business, providing customers with more capacity across a wider array of power lanes. RXO will realise significant synergies from the acquisition by quickly integrating Coyote’s business into RXO and leveraging our cutting-edge technology. The addition of Coyote’s customer base will diversify RXO’s vertical mix and will increase the number of customers that do more than $1 million in business with us by approximately 80 percent. This acquisition will provide RXO with both immediate and long-term opportunities for revenue and earnings growth and will generate significant returns for shareholders. I look forward to welcoming Coyote’s employees to our team and working together to achieve excellent results for our customers, shareholders, carrier partners and employees for years to come.”
RXO will continue to serve UPS’s brokered transportation needs under a contract that runs through January 2030, the release added.
The acquired business generated approximately $3.2 billion in revenue in 2023 with approximately $470 million in gross margin and approximately $86 million of adjusted EBITDA. RXO expects annualised cost synergies of at least $25 million. "RXO reaffirms its second quarter adjusted EBITDA outlook and continues to expect adjusted EBITDA between $24 million and $30 million."
UPS had bought Coyote Logistics from private equity firm Warburg Pincus for $1.8 billion in 2015 to expand its full-truckload services, Reuters reported.
