XPO Logistics Inc. sold its North American intermodal business to STG Logistics Inc. in a cash deal worth about $710 million. The sale is subject to a customary post-closing purchase price adjustment, the companies said.
Raymond James & Associates Inc. served as financial adviser to XPO for the transaction, and Wachtell, Lipton, Rosen & Katz served as legal adviser.
The intermodal unit generated $1.2 billion in revenue for XPO last year. Total revenue in 2021 was $12.8 billion. In a statement, XPO said the divested operations “provide rail brokerage and drayage services; 48 locations and approximately 700 employees have transferred to the buyer in the transaction.” The company also said the sale advances its strategic plan “to create two pure-play, publicly traded companies through a spin-off later this year.”
XPO said there is no assurance that the planned fourth quarter 2022 spin-off will occur “or, if it does occur, of its terms or timing.”
Brad Jacobs, chairman and chief executive officer of XPO Logistics, said the divestiture simplifies the company’s 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.”
“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,” Jacobs said.
Over the past year, XPO has strengthened these two businesses. With the less-than-truckload segment, Mario A. Harik, chief information officer and acting president of that business, said a lot of progress has been made since the fall when the company implemented a five-point action plan.
On a call with investors last month, Harik said one major objective “was to achieve better network flow, and our plan had an immediate impact. We started with selective strategic embargoes to rebalance the network. By November, we had cleared out the third-quarter backlog. This improved our on-time trends sharply from the end of the third quarter to the end of the fourth quarter, along with other service metrics.”
Harik said another key part of the plan was its in-house driver schools. “This is a huge advantage in the driver shortage,” he said on the call. “We graduated approximately 900 new drivers last year, which is more than twice the number of graduates we had in 2019. Our goal is to double that number again this year to about 1,800 drivers.”