XPO Logistics announces plan to spin off logistics segment

XPO

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XPO Logistics announced that its board of directors has unanimously approved a plan to pursue a spin-off of 100% of its logistics segment as a separate publicly traded company.

XPO intends to structure the spin-off as a transaction that is tax-free to XPO shareholders and would result in XPO shareholders owning stock in both companies.

Brad Jacobs, Chairman and CEO of XPO Logistics, said, “By uncoupling our transportation and logistics segments, we intend to create two high-performing, pure-play companies to serve the best interests of all our stakeholders. Both businesses will have greater flexibility to tailor strategic decision-making and capital allocations to their end-markets, with the benefit of strong positioning as customer-focused innovators. We currently believe that this spin-off is the most effective way to unlock significant value for our customers, employees and shareholders.”

If the spin-off is completed as expected: Jacobs will continue to serve as chairman and chief executive officer of XPORemainCo, and will become chairman of the NewCo board; Troy Cooper will continue to serve as XPORemainCo’s president, and the executives currently leading XPO’s global logistics segment will continue to serve in senior positions with NewCo.

The transaction is currently expected to be completed in the second half of 2021, subject to various conditions, including the effectiveness of a Form 10 registration statement, receipt of a tax opinion from counsel, the refinancing of XPO’s debt on terms satisfactory to the XPO board of directors, and final approval by the XPO board of directors. There can be no assurance that a separation transaction will occur or, if one does occur, of its terms or timing.

The XPO board of directors believes that the creation of two pure-play businesses with distinct service offerings will provide significant benefits to both companies and their stakeholders and that a lower debt profile with enhanced earnings potential will make it easier to achieve each company’s target of an investment-grade credit rating.

Post-separation, XPORemainCo will be a provider of freight transportation, primarily LTL and non-asset truck brokerage — these two services currently account for approximately 90% of adjusted EBITDA. The business will comprise:

  • The third largest provider of LTL transportation in North America, with an industry-best improvement in adjusted operating ratio over the five years of XPO ownership; and
  • The second largest truck brokerage provider worldwide, with a digital brokerage marketplace that has the fastest carrier adoption rate in the industry.
  • As of September 30, 2020, XPO had transportation operations in 17 countries, with approximately 38,000 employees and 724 locations.

Post-separation, NewCo will be the second-largest contract logistics company in the world, with approximately 200m sq ft of warehouse space. The business will comprise:

A range of innovative services enabled by intelligent technology, including high-value-add warehousing, omnichannel fulfilment, reverse logistics, cold-chain logistics and supply chain optimisation.

  • The largest outsourced e-commerce fulfilment platform in Europe, with burgeoning e-commerce and reverse logistics services in North America; and
  • XPO Direct™, a shared-space distribution network in North America with the flexibility to reposition customer inventories close to demand.
  • As of September 30, 2020, XPO had asset-light logistics operations in 27 countries, with approximately 58,000 employees and 766 locations.

XPO has retained Goldman Sachs & Co. LLC as its financial advisor and Wachtell, Lipton, Rosen & Katz as its legal advisor to assist with the spin-off process.

Source: XPO Logistics

 

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