XPO Logistics, Inc. announced that it has completed the sale of its truckload business to TransForce Inc. for approximately $558 million in cash, subject to customary adjustments. XPO says it will use the proceeds from the transaction to pay down debt.
The divested truckload operation encompasses some 3,000 tractors, 7,500 trailers and 29 locations that were part of XPO's October 2015 acquisition of Con-way Inc.
XPO will continue to offer full truckload services to customers in the United States, Mexico and Canada through its brokerage network. The company points out that it is the second-largest freight brokerage provider in the world.
Notably, when XPO moved to acquire Con-way, CEO Bradley Jacobs made another second-largest reference: "Our opportunistic acquisition of Con-way will make XPO the second-largest provider of LTL transportation in North America, [which is] a $35 billion market," he said in a statement then.
Regarding this sale, "TransForce is getting the 19th-largest asset-based truckload carrier in the U.S., a highly experienced workforce, and a presence in the cross-border Mexico freight corridor," Jacobs stated. "We divested these assets to concentrate on growing our value to customers in the areas where we're leaders in the industry: contract logistics, truck brokerage, less-than-truckload, last mile, intermodal, drayage, expedite and managed transportation.
"This transaction strengthens our balance sheet and improves our long-term growth profile," Jacobs continued. "In addition to de-leveraging, the sale reduces our annual capex requirements, increases our return on capital, and lessens the cyclicality of our operations."
The divested operations, which have been reported as part of XPO's Transportation segment, were expected to generate approximately $10 million of operating income for the remaining two months of 2016, and depreciation and amortization of approximately $10 million. The company will update its financial targets to reflect the transaction when it reports its third quarter results on Wednesday, Nov. 2.
J.P. Morgan served as financial advisor to XPO Logistics and Scudder Law Firm, P.C. acted as legal advisor in this transaction, according to XPO.