XPO Logistics announces it is selling its intermodal business to STG Logistics for $710 million

Soon after signaling its intent to divest its intermodal business, as part of a move geared towards creating two pure-play publicly traded companies in less-than-truckload (LTL) and truckload brokerage, as well as achieve an investment grade rating, Greenwich, Conn.-based XPO Logistics said today it has sold its intermodal business to Chicago-based STG Logistics, an asset-light provider of complex and highly customized logistics and transportation services focused on the global supply chain, for roughly $710 million.

XPO officials said that this deal is 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 rail brokerage and drayage services, with 48 locations, according to XPO, adding that roughly 700 XPO intermodal employees will join STG Logistics.

XPO entered the intermodal business, when it acquired Dublin, Ohio-based Pacer International, a freight transportation and logistics services provider and the third largest provider of intermodal services in North America, at the time, in April 2014.

“This divestiture simplifies our business model and moves our capital structure closer to investment-grade—two priorities in our strategic plan to unlock significantly more value for our stakeholders,” said Brad Jacobs, chairman and chief executive officer of XPO Logistics, in a statement. “We’ve completed a key step in preparing for our planned spin-off, when we’ll separate XPO into two publicly traded leaders in less-than-truckload transportation and tech-enabled brokered transportation services.”

XPO said that the divested business will operate under the moniker STG Intermodal and operate under the parent company STG Logistics, noting that the business will operate “exactly as it does today.”

An XPO spokesperson told LM that as a standalone entity, intermodal can be valued as a pure-play business and, under the new ownership’s focus, it will be able to grow even faster.

The spokesperson cited how XPO’s August 2021’s spin-off of its logistics group as a standalone publicly traded company split it into two separate publicly-traded companies on the New York Stock Exchange—with one focused on global contract logistics [GXO Logistics] and the other focused on less-than-truckload (LTL) and truck brokerage transportation services [XPO Logistics]—served as a template of sorts, for its recent push to split XPO into two distinct and separate entities.

“We learned from the GXO spin that when you have companies that are more focused and fit for purpose with a management team doing one thing, you can drive outsized growth,” said the spokesperson. “As we advance toward the completion of the spin, our goal is to have two pure-play industry powerhouses whose outperformance is accurately reflected in the stock. The spin-off will be a tech-enabled, best-in-class asset-light truck brokerage. XPO will be the third-largest less-than-truckload provider in North America and one of only a few national networks. We expect the spin-off to be completed by the end of the year.”

STG Logistics officials said that through this acquisition XPO's intermodal business will go to market as STG Logistics and provide seamless, fully integrated, port-to-door containerized logistics services including drayage, transloading, warehousing, fulfillment, rail transportation, and associated final mile distribution.

“I could not be more excited about this game-changing acquisition,” said Paul Svindland, STG CEO, in a statement. “We are combining STG’s leading position in facility-based container logistics with XPO Intermodal’s leading position in container transport, creating a platform with unparalleled capabilities. Once combined, the STG network will be able to handle a container from the instant it’s ready at a port or customer facility to the moment each individual shipment arrives at its final destination, all the while providing customers full visibility and a single source of accountability.”

Svindland told LM that the combination of STG’s leading position in facility-based container logistics with intermodal’s leading position in container transport will create what he called a platform of unparalleled capabilities, with XPO and STG being highly complementary businesses with little overlap of services.

"STG is best known for its IPI [interior point intermodal] network and have used third-party carriers for that leg of the transit to meet our customer demands," he said. "When the opportunity presented itself to bring those services in-house through the acquisition of the intermodal division of XPO, it made a lot of sense. We will have greater scale and influence as a result of the vertical integration. Our customers benefit from our commitment to invest resources to best-in-class logistics solutions with unparalleled service and support. To that end, STG will be doubling the container order for STG Intermodal from 2,000 to 4,000 by year-end.  In short, today’s acquisition will only bring more offerings and better solutions for 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 mergers and acquisitions advisory firm focused on the transportation, logistics, and supply chain technology sector, said this move highlights how XPO is making smart moves to simplify the business, create pure-plays, and generate more shareholder value.

“XPO today is getting a conglomerate discount, so they are unbundling,” he said. “The intermodal move allows them to sell its 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 close to a decade ago. It gives XPO an accretive valuation, and it simplifies the scope of XPO’s offering. The spin or sale of the European business should generate another $1 billion or so. And the spin of its asset-light truck brokerage and last-mile business should boost the value of that business too. In the end, this will transform XPO into a pure-play LTL operator, like Old Dominion. And the result should be a more focused team, a leaner business, a cleaner balance sheet, and in all likelihood a more valuable company.”