XPO Logistics, one of the largest providers of warehousing, trucking, and last-mile services in the U.S., announced its plan to split its logistics and transportation businesses into two separate companies: XPORemainCo, a global provider of less-than-truckload (LTL) and truck brokerage transportation services; and contract logistics provider NewCo.
“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,” said Brad Jacobs, XPO Logistics chairman and CEO. “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 CEO 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 company is conducting searches for a chief financial officer and a head of investor relations for the planned NewCo company.
Post-separation, XPORemainCo is expected to be the third largest provider of LTL transportation in North America and the second largest truck brokerage provider worldwide. As of Sept. 30, 2020, XPO had transportation operations in 17 countries, with approximately 38,000 employees and 724 locations.
NewCo, on the other hand, is projected to be the world’s second largest contract logistics company, with approximately 200 million square feet of warehouse space. The business will comprise a range of services, including warehousing, omnichannel fulfillment, reverse logistics, cold-chain logistics and supply chain optimization. According to XPO, NewCo will also offer the largest outsourced e-commerce fulfillment platform in Europe, with growing e-commerce and reverse logistics services in North America.
In its most recent earnings report, XPO announced that its logistics segment generated revenue of $1.58 billion for the third quarter 2020, compared with $1.51 billion for the same period in 2019. Segment revenue growth was led by strong demand from e-commerce and other consumer-related verticals, according to XPO.
XPO first hinted at the possibility of a sale or spin-off of one or more business units on Jan. 15, 2020. At the time, Jacobs said: “XPO is the seventh best-performing stock of the last decade on the Fortune 500, based on Bloomberg market data. The share price has increased more than ten-fold since our investment in 2011. Still, we continue to trade at well below the sum of our parts and at a significant discount to our pure-play peers. That’s why we believe the best way to continue to maximize shareholder value is to explore our options, while remaining intensely committed to the satisfaction of our customers and employees.”
Both XPORemainCo and NewCo are expected to trade on the New York Stock Exchange. The transaction is expected to be completed in the second half of 2021, subject to various conditions.