XPO Logistics announces the sale of its intermodal business to STG Logistics for $710 million
Shortly after signaling its intention to divest its intermodal business, as part of a move to create two publicly traded pure-play companies in less than truckload (LTL) and truckload brokerage, as well as to obtain an investment grade rating, Greenwich, Connecticut-based XPO Logistics, today announced that it has sold its intermodal business to Chicago-based STG Logistics, a light-duty provider of complex and highly customized logistics and transportation services focused on the global supply chain, for approximately $710 million.
XPO officials said the deal was subject to a customary post-closing purchase agreement.
XPO’s Intermodal Group was part of the company’s Brokerage and Other Services segment, generating $1.2 billion in revenue in 2021. This group provides railroad brokerage and drayage services, with 48 locations, according to XPO, adding that approximately 700 XPO intermodal employees will join STG Logistics.
XPO entered the intermodal business by acquiring Dublin, Ohio-based Pacer International, a provider of freight transportation and logistics services and the third-largest provider of intermodal services in North America, at the time , in April 2014.
“This divestiture simplifies our business model and brings our capital structure closer to investment grade – two priorities of our strategic plan to unlock significantly more value for our stakeholders,” said Brad Jacobs, President and CEO of XPO Logistics, in a statement. . “We have reached a key milestone in preparation for our planned spin-off, when we will separate XPO into two publicly traded leaders in LTL and technology-based transportation brokerage services.”
XPO said the divested business will operate as STG Intermodal and operate under parent company STG Logistics, noting that the business will operate “exactly as it does today.”
A spokesperson for XPO said ML that as a stand-alone entity, intermodal can be considered a pure business and, under the guidance of the new owner, it will be able to grow even faster.
The spokesperson explained how XPO’s split in August 2021 from its logistics group as a stand-alone publicly traded company split it into two separate New York Stock Exchange-listed companies, one focusing on global contract logistics. [GXO Logistics] and the other focused on LTL and truck brokerage services [XPO Logistics]– served as a template of sorts, for its recent push to split XPO into two distinct and separate entities.
“We’ve learned from the GXO rotation that when you have businesses that are more focused and fit for purpose with an executive team doing one thing, you can drive outsized growth,” the spokesperson said. “As we move towards completing the spin-off, our goal is to have two pure industry powerhouses whose outperformance is accurately reflected in the stock. The spin-off will be a light-duty truck brokerage company with of technology assets, best in class. XPO will be the third largest LTL provider in North America and one of the few national networks. We expect the spin-off to be completed by the end of the year. ‘year.
STG Logistics officials said that with the acquisition, XPO’s intermodal business will be marketed as STG Logistics and will provide seamless and fully integrated port-to-door containerized logistics services, including drayage, transshipment , warehousing, fulfillment, rail transportation and associated last mile distribution. .
“I couldn’t be more excited about this game-changing acquisition,” Paul Svindland, CEO of STG, said in a statement. “We are combining STG’s leadership position in facility-based container logistics with XPO Intermodal’s leadership position in container shipping, creating a platform with unparalleled capabilities. When combined, the STG network will be able to manage a container from the moment it is ready at a port or customer facility to the time each individual shipment arrives at its final destination, while providing customers with visibility comprehensive and a single source of liability. ”
Svindland said ML that combining STG’s leadership position in facilities-based container logistics with intermodal’s leadership position in container shipping will create what he called a platform of unparalleled capabilities, XPO and STG being highly complementary companies with little overlap of services.
“STG is best known for its IPI [interior point intermodal] network and have used third-party carriers for this leg of the transit to meet our customers’ demands,” he said. “When the opportunity arose to internalize these services through the acquisition of XPO’s intermodal division, it made a lot of sense. We will have greater scale and greater influence through vertical integration. Our customers benefit from our commitment to investing resources in the best logistics solutions with unparalleled service and support. To this end, STG will double the container order for STG Intermodal from 2,000 to 4,000 by the end of the year. In short, today’s acquisition will only bring more offerings and better solutions to our customers.”
Ben Gordon, Managing Partner of Cambridge Capital, an investor in niche supply chain leaders, and also Managing Partner of BGSA Holdings, a leading M&A advisory firm focused on the transport technology sector , Logistics and Supply Chain, said the move highlights how XPO is taking smart steps to simplify the business, create pure games and drive more shareholder value.
“XPO today has a conglomerate discount, so they are unbundling,” he said. “The intermodal move allows them to sell their rail brokerage and drayage business for $710 million to a logical buyer. STG is led by Paul Svindland, who helped run Pacer, the intermodal business XPO bought nearly a decade ago. This gives XPO an accretive valuation and simplifies the scope of XPO’s offering. The rotation or sale of the European business is expected to generate approximately another $1 billion. And the rotation of its light truck brokerage and last mile business should also boost the value of that business. Ultimately, this will turn XPO into a pure-play LTL operator, like Old Dominion. And the result should be a more focused team, a leaner company, a cleaner balance sheet and, in all likelihood, a more valuable company.
About the Author
Jeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics management, Modern material handlingand Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine where he covers all aspects of the supply chain, logistics, freight forwarding and material handling industries on a daily basis. Contact Jeff Berman