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United Parcel Service (UPS) has sold its Coyote Logistics business for $1.025 billion, resulting in a loss of $775,000 to UPS. The buyer is RXO Brokerage.
“As UPS positions itself to become the premium small package provider and logistics partner in the world, the decision to sell our Coyote Logistics business allows an even greater focus on our core business,” UPS CEO Carol B. Tomé said in a statement on Sunday.
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Coyote, a 3PL. is a global provider that works with 100,000 network carriers and manages 10,000 loads per day. UPS said the transaction is expected to close by the end of 2024. Once the transaction closes after meeting certain customary regulatory approvals and closing conditions, RXO will become the third-largest North American freight broker. According to Transport Topics, C.H. Robinson Worldwide is the largest freight brokerage firm, followed by Total Quality Logistics.
UPS acquired Coyote in July 2015 for $1.8 billion. At the time, the acquisition expanded UPS’ portfolio by adding large scale non-asset based full-truckload (FTL) and transportation management services. Founded in 2006, Coyote posted annual revenue of $2.1 billion in 2014.
According to data from RXO, which recorded 2023 revenue of $3.9 billion, Coyote last year posted revenue of $3.2 billion. While the $3.2 billion is above the $2.1 billion in revenue when UPS acquired the firm, it is below the $4 billion-plus generated during the COVID-19 pandemic when e-commerce demand increased. Coyote’s current volume mix is 79 percent truckload, 19 percent LTL, or less than full truckload, and 2 percent intermodal.
RXO is set to acquire Coyota on a cash-free, debt-free basis, using a mix of equity and debt that includes $300 million of committed equity from MFN Partners and $250 million of committed equity from Orbis Investments. RXO said the deal will be immediately accretive to adjusted diluted earnings per share and adjusted free cash flow as it provides RXO with enhanced market position, diversification and expansion of its customer base. The deal is also expected to provide annualized cost synergies of at least $25 million, RXO said.
“RXO’s highly accretive acquisition of Coyote will immediately increase the scale of our brokerage business, providing customers with more capacity across a wider array of power lanes,” RXO CEO Drew Wilkerson said. “RXO will realize significant synergies from the acquisition by quickly integrating Coyote’s business into RXO and leveraging our cutting-edge technology.”