XPO Logistics eyes sales and spinoffs
Greenwich-based XPO logistics has announced that it is considering a sale or spin-off of one or more of its businesses, potential deals that would aim to benefit shareholders.
Following the announcement Wednesday, shares of the transportation-and-logistics giant surged and opened Thursday at a 52week high of $96.20. As they disclosed their plan, company officials cited other indicators of robust performance, including ranking as the Fortune 500’s seventhbest-performing stock of the past decade, based on Bloomberg market data.
“Still, we continue to trade at well below the sum of our parts and at a significant discount to our pure-play peers,” XPO CEO and Chairman Bradley Jacobs said in a statement. “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.”
XPO officials said that they had not decided which, if any, units to sell or spin off,
but they ruled out a sale of the firm’s North American less-than-truckload shipping division.
The company did not set a timetable for completing the review of its strategic options.
In its only sale so far, XPO completed in October 2016 the transfer of its truckload business to the Canadabased TransForce for approximately $558 million.
In the first nine months of 2019, LTL revenues totaled about $3.7 billion, comprising about 45 percent of the firm’s returns during that period.
“We have been in an industrial recession for the last year,” Jacobs said on a conference call with investment analysts last October. “I say
that just based on the objective fact that not only us, but the entire LTL (lessthan-truckload) industry has seen negative tonnage growth in each of the last four quarters. In a contracting market, we’ve still been able to post excellent numbers in LTL.”
Third-quarter revenues dropped about 4 percent year-over-year, to $4.15 billion. The top line took into account a 6 percent revenue drop in transportation revenues, to $2.68 billion for the third quarter.
Those lower transportation returns reflected decreased freight brokerage and “direct postal injection” revenues from the company's largest customer, lower truck brokerage rates and “unfavorable” foreign currency exchange.
Last year, XPO disclosed that it would lose approximately
$600 million in returns from its largest customer, equal to about twothirds of its business from that firm. The company has not named the client, but it has been widely reported to be Amazon.
In the meantime, the company is pushing ahead with 10 initiatives, largely focused on technology. Those projects could cumulatively improve its bottom line by approximately $700 million to $1 billion by 2022.
As the No. 180 company on last year’s Fortune 500 list, XPO operates across 1,531 locations in 30 countries, with about 100,000 employees. It is headquartered at 5 American Lane, in the northwest corner of Greenwich.