XPO Logistics is spinning off 100% of its logistics segment as a separate, publicly traded company.
The Greenwich firm intends to structure the spinoff as a transaction that is tax-free to XPO shareholders and would result in XPO shareholders owning stock in both companies.
“By separating into two global segments ”“ two separate public trading companies, two real powerhouses ”“ leaders in logistics and transportation, we”™ve got two strong companies that are really easy to understand,” XPO Chairman and CEO Brad Jacobs told CNBC.
If completed, the spinoff will result in separate businesses with clearly delineated service offerings: XPORemainCo, a global provider of less-than-truckload (LTL) and truck brokerage transportation services; and NewCo, which it says would be the second-largest contract logistics provider in the world. Both companies are expected to trade on the New York Stock Exchange.
Both of the new entities”™ names are provisional, a spokesman said.
“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,” Jacobs said in making the announcement.
If the spinoff 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 transaction is 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.
According to the announcement, XPO”™s board believes that:
- Both of the new entities would benefit from an undiluted focus on their specific strategic priorities and customer requirements.
- Each business would be able to deepen its differentiation by having its technology team focus on enhancing the proprietary software developed for its specific service offering ”“ notably, the XPO Connect digital transportation platform and XPO Smart productivity tools for logistics and LTL operations.
- Each standalone company would have an investor base aligned with a clear-cut value proposition and be valued separately by the investment community, potentially resulting in an increase in equity value that would benefit each of the businesses in executing its strategy.
- Each business would be able to attract and retain world-class talent by offering meaningful equity-based compensation that correlates closely to performance.
- Separate public stock listings would enhance each company”™s ability to pursue accretive M&A opportunities, with the benefit of an independent equity currency at a potentially higher value.
XPORemainCo
Post-separation, XPORemainCo will provide freight transportation, primarily LTL and nonasset truck brokerage, which 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.
- The second-largest truck brokerage provider worldwide, with a digital brokerage marketplace that has the fastest carrier adoption rate in the industry.
As of Sept. 30, XPO had transportation operations in 17 countries, with approximately 38,000 employees and 724 locations.
NewCo
Post-separation, NewCo will be the second-largest contract logistics company in the world, with approximately 200 million square feet of warehouse space. The business will comprise:
- A range of innovative services enabled by intelligent technology, including high-value-add warehousing, omnichannel fulfillment, reverse logistics, cold-chain logistics and supply chain optimization.
- The largest outsourced e-commerce fulfillment platform in Europe, with burgeoning e-commerce and reverse logistics services in North America.
- XPO Direct, a shared-space distribution network in North America with the flexibility to reposition customer inventories close to demand.
As of Sept. 30, 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.
