Pacer purchase is big move into intermodal for XPO Logistics

The purchase is composed of a mix of cash and paper. It is part of XPO Logistics’ attempt to diversify into faster growing areas of logistics such as ‘last mile delivery’ and intermodalism. The company’s most recent purchases, before the Pacer deal, were those of the ‘last mile’ providers 3PD and Optima, as well the transportation management web-site NLM in 2013.

Specifically with the acquisition of Pacer, XPO Logistics is looking to tap into the cross-border market between Mexico and the US which is growing strongly and in which Pacer has a substantial market presence. XPO will now be the third largest intermodal company by revenue in the US. The existing management of Pacer will be kept in place.

XPO Logistics is already one of the fifty largest logistics service providers in the US and it appears to be intent on continuing to build-up a broad based business across the logistics sector. The company’s strategy is to create economies of scale across a number of transport markets by buying-up providers and developing relationships with large customers who can provide base volumes and to which it can cross-sell. The different elements of the business will be integrated through a common technology platform. Clearly the intention is to build a very large logistics service provider in North America which has the potential to drive consolidation in the sector.

Bradley Jacobs, the owner of XPO Logistics, has a record of building brokerage and rental companies. However, apart from a solid waste management company which had some exposure to waste transportation, XPO is his first experience of building a logistics service provider.