Tuesday, September 29, 2015

Con-way on Way Out

Major carrier acquired by XPO Logistics as carriers continue their consolidation.

If you had $3 billion, would you buy a motor freight business?

XPO Logistics did. The company launched a tender offer last week to purchase Con-way Inc., one of the largest U.S. LTL and truckload carriers, for approximately $3 billion, a 30 percent premium over Con-way’s pre-purchase market valuation

The intent, said XPO Logistics Inc. CEO Brad Jacobs, is to broaden their supply chain offerings into less-than-truckload and U.S. truckload freight and create a company with annual revenue of $15 billion. Jacobs told Transport Topics that “the acquisition will make our platform more powerful and flexible” by offering a broader array of services. The purchase of the company that ranks No. 4 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers follows just three months after XPO expanded into Europe by purchasing France’s Norbert Dentressangle for $3.5 billion, and will create a business with about one-third of its revenue from LTL and other asset-based freight and the rest from non-asset offerings.

Con-way has been one of the real backbone carriers in the LTL world, while Connecticut-based XPO is a relatively unknown player in U.S. trucking. It’s a little as though a niche brewery such as Vermont’s Magic Hat announced they were acquiring Anheuser-Busch. With margins for asset-based carriers always tight, the move by XPO represents a strong bet on a capacity shortage in the industry’s future, leading to increased profits “down the road.” How XPO will deal with the significant debt they are taking on with the acquisition, consolidating terminals or seeking synergies with other units of their burgeoning company, remains to be seen. They are expected to rebrand Con-way’s operations as XPO Logistics.

Sources inside Con-way said there is no reason to believe that any interruption or decline in service would result from the purchase, which is expected to close in October. The truckload and LTL, or less-than-truckload, industry has seen a round of consolidation, with the purchase by UPS of Coyote Logistics for $1.8 billion in July another recent example.

Kirk Shearer
800-989-0054 x103

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