RXO Becomes Third-Largest Freight Broker With Coyote Deal
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RXO has finalized its $1.025 billion acquisition of Coyote Logistics from UPS, a move that makes RXO the third-largest provider of brokered transportation in North America. The deal, announced June 23, closed Sept. 16.
UPS sold Coyote Logistics, a freight brokerage firm founded in 2006, as part of the package delivery giant’s strategy to focus more on its core small-package delivery business. UPS purchased Coyote in 2015 for $1.8 billion, but with the sale, UPS appears to be refocusing on what CEO Carol Tomé described as “premium small-package” services.
For RXO, the acquisition offers the potential for considerable growth in its transportation network. The company, which specializes in asset-light transportation, expects to benefit from Coyote’s established customer base and carrier relationships. Drew Wilkerson, CEO of RXO, described the acquisition as an opportunity to provide more capacity to its customers and increase freight access for its carriers.
“We’re thrilled to welcome Coyote’s employees, customers and carriers to RXO,” Wilkerson said in a statement.
Wilkerson
RXO indicated that customers could see improved network density and additional power lanes, while carriers may gain access to more freight opportunities. The company also expects that carriers will be able to reduce the number of deadhead miles, or when trucks run without cargo. These operational advantages, according to RXO, are part of the rationale behind the acquisition, though the broader impact on the market will depend on the successful integration of Coyote’s systems and workforce.
RXO, headquartered in Charlotte, N.C., operates as an asset-light transportation provider, offering tech-enabled truck brokerage, managed transportation and last-mile delivery services.
It ranks No. 20 on the Transport Topics Top 100 list of the largest logistics companies in North America, and No. 7 on the freight brokerage sector list. Before the acquisition, Coyote ranked No. 4 on the brokerage sector list. Combined, the two entities’ gross revenues from last year amount to more than $6 billion, which would place the new company at No. 3 on the brokerage list.
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The deal was financed through a combination of equity and debt. Goldman Sachs & Co. served as the financial adviser to RXO, while J.P. Morgan advised UPS. Legal counsel for RXO was provided by Paul, Weiss, Rifkind, Wharton & Garrison, with King & Spalding representing UPS.
UPS ranks No. 1 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 4 on the TT logistics 100.
The acquisition adds to a growing trend of consolidation in the freight brokerage market, where companies are looking for ways to increase efficiency and scale. RXO has stated that the deal will immediately increase its market share in the brokered freight space and offer more capacity across its network.
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