XPO Logistics Sells Truckload Unit, Posts Record Third-Quarter Profit

This story appears in the Nov. 7 print edition of Transport Topics.

The North American truckload landscape has shifted with XPO Logistics selling its Con-way Truckload business to Canadian transportation conglomerate TransForce Inc. for $558 million.

XPO also last week reported record profit for the third quarter, earning $13.8 million, or 11 cents per share, on revenue of $3.7 billion in the three months ended Sept. 30. That compares with a net loss of $93.1 million, or 94 cents, on revenue of $2.4 billion in the same period a year ago.

“We achieved this strong performance in a mixed operating environment. In North America, vigorous demand from e-commerce drove growth in our contract logistics and last-mile operations, while brokerage and intermodal were generally soft,” CEO Bradley Jacobs said after results were announced Nov. 2.

“Our less-than-truckload business in North America had another outstanding quarter,” he said, citing a 40% jump in less-than-truckload operating income as well as new business in Europe.

The decision to sell the truckload business, Jacobs told Transport Topics, was based on TransForce offering a “fair price.” He said the company previously had spurned three offers for less money.

Proceeds from the sale will allow XPO to pay down about $550 million of long-term debt and boost growth in other freight sectors where the company has a greater share of the market.

Jacobs said that XPO is not currently looking to buy or sell any other companies but is focusing instead on improving the operations it already has.

XPO ranks No. 3 on the Transport Topics Top 100 list of largest U.S. and Canadian for-hire carriers, and vaulted into the top ranks of trucking companies with its $3 billion acquisition of Con-way Inc., the Ann Arbor, Michigan-based parent of LTL carrier Con-way Freight, Con-way Truckload and Menlo Logistics, in 2015.

The purchase of XPO’s truckload business by TransForce is the largest trucking deal this year and is viewed by some as a sign of better times ahead for carriers that have been mired in a weak freight market for most of the past year.

“We believe we are investing in the truckload space at a critical time and are well-positioned to benefit from future growth opportunities,” Alain Bedard, CEO of Montreal-based TransForce, said in announcing the all-cash transaction Oct. 27.

Analysts also liked it.

“Looks like a match made in heaven,” John Larkin, an equity analyst for Stifel Financial Corp., commented, noting that the deal frees up resources for XPO Logistics to pursue its consolidation strategy internationally while giving TransForce a platform to expand its truckload business in the United States and Mexico.

Jason Seidl, a trucking analyst for Cowen and Co., said the deal raises the prospect of TransForce breaking its business into two parts: “TransForce may well be on its way to splitting up into a truckload operator and a separate entity that focuses on the rest of its business,” Seidl said.

TransForce, which ranks No. 10 on the for-hire TT100, is a holding company for more than 60 transportation companies and logistics firms operating in Canada and the United States. The roster includes 11 less-than-truckload freight carriers, 13 dry van truckload and dedicated carriers, eight parcel delivery and courier firms, 20 flatbed and heavy specialized, petroleum and chemical tank and liquid and dry bulk carriers, plus 13 logistics service providers and an equipment leasing firm.

In a conference call with investment analysts, TransForce’s Bedard stressed that the truckload business will continue to operate from its headquarters in Joplin, Missouri, with no change in management, and that the company would be rebranded as CFI, or Contract Freighters Inc. — the name of the privately held company that was acquired by Con-way Inc. for $750 million in 2007.

“CFI is run by a fantastic management team,” Bedard said. He identified Tim Staroba as someone whom the company “will build around.”

Staroba, a senior vice president, joined Con-way Truckload earlier this year from Con-way Freight, according to Katlin Owens, communications coordinator. Other top executives who have been with the company for many years include Dustin Quesenberry, vice president of U.S. operations, Mary Cervin, vice president of finance, and Randy Cornell, vice president of maintenance, Owens said.

“These guys run a lean and mean operation,” Bedard said of the CFI management group. “I mean, this is a great company.”

In terms of growth, Bedard said he wants to help CFI expand its dedicated truckload business and perhaps add flatbed and tank truck operations by working with other TransForce business units.

There are no plans to combine CFI with the business of Transport America, a truckload carrier based in Eagan, Minnesota, that TransForce acquired for $310 million in 2014.