GREENWICH — XPO Logistics announced this week that it would spin off its truck-brokerage business into a separate publicly traded firm, an announcement made a few months after the Greenwich-based company spun off its logistics business.
At the same time, XPO announced that it would divest from its European business through a sale or a listing on a European stock exchange. In addition, it confirmed that it was in “exclusive negotiations” with a potential buyer for its intermodal business, which involves freight such as container shipping that requires more than one mode of transportation.
Officials at the No. 190 company on last year’s Fortune 500 list said they believe XPO would be more effective as a “pure-play” specialist in less-than-truckload (LTL) trucking, which allows multiple customers to ship goods in the same truck. The company comprises the third-largest LTL provider in North America, producing about $4 billion in LTL revenues in 2021, or about 30 percent of total returns last year.
“Our two core businesses of North American less-than-truckload and tech-enabled truck brokerage are industry-leading platforms in their own right, each with a distinct operating model and a high return on invested capital,” XPO CEO and Chairman Brad Jacobs said in a statement. “We believe that by separating these businesses through a spin-off, we can significantly enhance value creation for our customers, employees and shareholders, as we did with our successful spin-off of GXO last year.”
The company expects to complete the spin-off in the fourth quarter of 2022. After the spin-off, XPO would remain headquartered at 5 American Lane in Greenwich, maintain its current management team, including Jacobs and keep the XPO ticker symbol.
The new truck brokerage company would be headquartered in Charlotte, N.C., and operate under a new name and with its own management team. It would encompass last-mile delivery, freight forwarding and managed-transportation services. Brokerage and other services last year generated about $9 billion in revenues, or about 70 percent of XPO’s total.
Within Connecticut, XPO would keep its LTL terminal in Meriden, but it would spin off its last-mile hubs in Norwich, Wallingford and Windsor.
As of year-end 2021, the proposed spin-off operations included 172 locations and approximately 5,500 employees, with about 10,000 customers. XPO employs a total of about 42,000 across 771 locations, serving around 50,000 shippers.
The announcement was made about seven months after XPO completed the spin-off of its warehouse-focused logistics business into its own publicly traded firm, GXO Logistics, which is headquartered next to XPO on American Lane.
A number of investment analysts expressed confidence in the planned changes. Deutsche Bank, which gives XPO stock a “buy” rating, estimated in a research note Tuesday that XPO’s plan would create “at least, $13 per share of incremental equity value (20 percent of current equity value) … but closer to $30 per share under reasonable valuation assumptions (50 percent of current equity value).”
“The bottom line is this is exactly the right path for the company based on our assessment of significant dislocation in XPO’s public equity price and its intrinsic value,” Deutsche Bank research analyst Amit Mehrotra said in the note.
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