XPO Logistics to keep truckload business it acquired through Con-way deal

In an 8-K filing with the Securities Exchange Commission this week, third-party logistics and freight transportation services provider XPO Logistics said it plans to retain the truckload business it acquired through its $3 billion October 2015 acquisition of freight transportation and logistics services provider Con-way Inc. 

XPO said that after completing its evaluation of strategic opportunities to divest Con-way’s truckload business, it is holding onto it “as part of its integrated supply chain offering [and] in deciding to retain this business, the Company considered the value that shippers place on owned truckload capacity, particularly in U.S.-Mexico cross-border lanes, and the opportunity to improve the utilization of the assets.”

XPO had previously considered selling off Con-way Truckload around the time its acquisition of Con-way was made official.

XPO Chairman and CEO Brad Jacobs told LM in an October that XPO had received some unsolicited inbounds (offers) from interested buyers of Con-way Truckload but had not made any decision whether to keep it or sell it.

“The argument to sell it is it would reduce our debt,” he said at the time. “The argument to keep it is there’s a ton of synergy with our brokerage group. We can significantly reduce the empty miles. The other argument to keep it is we’ve done some town halls with the Con-way truckers and they are an extremely professional and focused group.”

In deciding not to sell the truckload business, XPO’s asset count on the truckload side is high, with 400 Independent Contractors, 2,500 company tractors and 8,000 trailers; 3,200 company employees and 400 Independent Contractors; 5 U.S. terminals and 9 U.S. drop yards and 12 offices in Mexico, according to a company spokesman.

In an interview with LM yesterday, Jacobs said XPO decided to keep truckload, because it sees a lot of growth opportunities with it that outweigh the financial benefits of selling it.

“We like the fact that 35 percent of [truckload’s] business is with cross-border Mexico, which is a lane we like a lot, and we see growth in it,” he explained. “We also see a ton of synergy between truckload other parts of our business, especially truck brokerage. Our sales force is eager to get that freight into our optimizer (XPO’s proprietary Freight Optimizer technology, which allows XPO to share capacity and data) so they can sell that capacity to our customers.”

Keeping truckload in house also provides XPO with the opportunity to integrate it with customers with the company’s other service lines.

In explaining how that will work, Jacobs said that historically the truckload sales force has operated as a silo separate from the rest of the organization.

“Our first move will be to get the sales people from the truckload business together with salespeople from other parts of the organization and go over, customer by customer, what the opportunities are to serve them with our non-truckload services to the truckload customers and vice versa,” he said.

And due to being a true multimodal provider, Jacobs said that XPO is “mode agnostic” and wants to offer its customers alternatives and provide solutions that are the most cost-effective for them.

XPO Logistics fourth quarter and full-year 2015 earnings will be released on February 24.