XPO Logistics makes $3bn acquisition of Con-Way

XPO Logistics and Con-way announced that they have entered into a definitive agreement for XPO Logistics to acquire Con-way.

Headquartered in Ann Arbor, US, Con-way is a Fortune 500 company with a transportation and logistics network of 582 locations and approximately 30,000 employees. For the full year 2015, consensus analysts’ estimates for Con-way are $5.7bn of revenue and $528m of adjusted EBITDA.

The total transaction value is approximately $3.0bn, including $290m of net debt. The transaction is expected to close in October 2015, following the successful completion of the tender offer and subject to the satisfaction of customary conditions, including regulatory approvals. The boards of directors of XPO and Con-way have unanimously approved the transaction.

Bradley Jacobs, Chairman and Chief Executive Officer of XPO Logistics, said, “Our opportunistic acquisition of Con-way will make XPO the second largest provider of less-than-truckload transportation in North America, a $35bn market. LTL is a non-commoditized, high-value-add business that’s used by nearly all of our customers. Con-way is a premier platform that we will run with a fresh set of eyes as part of our broader offering. Importantly, we’ll gain strategic ownership of assets that will benefit our company and our customers during periods of tight capacity.”

Jacobs continued, “The Con-way transaction will nearly double our pro-forma full year EBITDA to approximately $1.1bn and increase our revenue to $15bn upon closing. We’ll immediately begin executing our plan to improve the operating profit of the acquired operations by $170m to $210m over the next two years. We’ll raise our year-end 2015 target run rates for revenue and EBITDA, and issue new long-term targets, when we close.”

The acquisition of Con-Way is expected to expand XPO’s global contract logistics platform by 22m sq ft, to a total of 151m sq ft, and will add 160 facilities to the company’s footprint. The acquired operations serve blue chip customers in verticals such as high tech, healthcare and retail adding to XPO’s existing base in aerospace, retail, telecom, agriculture, chemicals and food and beverage. XPO is also expected to add to its existing e-commerce capabilities with the acquisition of Con-Way’s existing contract logistics platform.

The acquisition of Con-way’s truckload fleet, including dedicated carriage, is expected to increase XPO’s cross-border Mexico services, which include intermodal, truck brokerage and expedite.

The combination will grow XPO’s global ground transportation network to approximately 19,000 owned tractors and 46,000 owned trailers, 10,000 trucks contracted through independent owner operators, and access to more than 50,000 independent carriers. In North America, XPO will have approximately 11,000 owned tractors and 33,000 owned trailers, 6,000 trucks contracted through independent owner operators, and access to more than 38,000 independent carriers.

All of the acquired operations – Con-way Freight, Menlo Logistics, Con-way Truckload and Con-way Multimodal – will be rebranded as XPO Logistics. Upon finalising the acquisition, XPO Logistics is expected to have approximately 84,000 employees at 1,469 locations in 32 countries.

Bradley Jacobs, Chairman and Chief Executive of XPO Logistics, is expected to retain these positions and lead the combined company. Douglas Stotlar, Con-way’s President and Chief Executive Officer, is expected to serve in a non-executive advisory capacity during a transition period.