United Parcel Service (UPS) announced on Sunday, June 23, that its Coyote Logistics division would be acquired by the freight transportation services firm RXO for a staggering $1.025 billion.
RXO Acquiring Coyote Logistics
In a press statement, RXO said that the $300 million and $250 million equity investments from MFN Partners and Orbis Investments, respectively, would finance the deal. The remaining funds would come from the company's equity and debt.
The purchase is anticipated to strengthen RXO's position in the market, increase its client base diversity and expansion, and widen its carrier network. After the deal closes, RXO will rank as the third-biggest North American supplier of brokered transportation.
Both RXO's adjusted diluted earnings per share and adjusted free cash flow are projected to see immediate and substantial positive effects from the merger, as stated in the announcement.
With a gross margin of around $470 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of about $86 million, Coyote Logistics brought in almost $3.2 billion in 2023. RXO is aiming for at least $25 million in cost synergies per year.
UPS to Concentrate on Its Core Business
Reuters cited UPS CEO Carol Tome saying that the sale of the Coyote Logistics division will enable UPS to concentrate even more on its core business.
In 2015, UPS expanded its full-truckload services when it acquired Coyote Logistics for $1.8 billion from private equity company Warburg Pincus.
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