Thursday, December 3, 2020

Major Road Freight Player Plans Split of LTL Haulage and Logistics Interests

Separation of Group but Green Drive Continues
Shipping News Feature

US – EUROPE – WORLDWIDE – The board of directors of XPO Logistics Inc has unanimously voted through a plan to spin-off of 100% of its logistics segment as a separate publicly traded company. Meanwhile in Europe the company has taken on another large tranche of liquefied natural gas (LNG) powered trucks for its French fleet of HGVs.

First that news from the US, as XPO sets about splitting its operations in a deal structured so as to be tax-free to XPO shareholders resulting in them owning stock in both companies. Assuming completion the spin-off will result in separate businesses with clearly delineated service offerings: XPORemainCo, a global provider of less-than-truckload (LTL) and truck brokerage transportation services; and NewCo, claimed to be the second largest contract logistics provider in the world.

Both global companies are expected to trade on the New York Stock Exchange and Brad Jacobs, chairman and chief executive officer of XPO Logistics, said:

“By uncoupling our transportation and logistics segments, we intend to create two high-performing, pure-play companies to serve the best interests of all our stakeholders. Both businesses will have greater flexibility to tailor strategic decision-making and capital allocations to their end-markets, with the benefit of strong positioning as customer-focused innovators. We currently believe that this spin-off is the most effective way to unlock significant value for our customers, employees and shareholders.”

If the spin-off is completed as expected, and there are no guarantees on that, Jacobs will continue to serve as chairman and chief executive officer of XPORemainCo and will become chairman of the NewCo board, Troy Cooper will continue to serve as XPORemainCo’s president and the executives currently leading XPO’s global logistics segment will continue to serve in senior positions with NewCo.

The transaction is currently expected to be completed in the second half of 2021, subject to various conditions, including the effectiveness of a Form 10 registration statement, receipt of a tax opinion from counsel, the refinancing of XPO’s debt on terms satisfactory to the XPO board of directors, and final approval by the XPO board of directors.

The XPO board of directors believes that the creation of two pure-play businesses with distinct service offerings will provide significant benefits to both companies and their stakeholders. There would be more chance of an investment-grade credit rating due to a lower debt profile with enhanced earnings potential.

Additionally, according to the XPO board, each business would be able to deepen its differentiation by having its technology team focus on enhancing the proprietary software developed for its specific service offering. Notably, the XPO Connect™ digital transportation platform and XPO Smart™ productivity tools for logistics and LTL operations.

The company’s views come from observation of publicly traded rivals, each of which have more specialised business models. Post-separation, XPORemainCo will be a provider of freight transportation, primarily LTL and non-asset truck brokerage, these two services currently account for approximately 90% of adjusted EBITDA.

The business will comprise the third largest provider of LTL transportation in North America, with an industry-best improvement in adjusted operating ratio over the five years of XPO ownership. It would claim the position as the second largest truck brokerage provider worldwide with XPO having transportation operations in 17 countries as at 30 September, with approximately 38,000 employees and 724 locations.

For its part NewCo would be the second largest contract logistics company in the world, with approximately 200 million square feet of warehouse space. The business would comprise a range of  services enabled by intelligent technology, including high-value-add warehousing, omnichannel fulfilment, reverse logistics, cold-chain logistics and supply chain optimisation and including the largest outsourced e-commerce fulfilment platform in Europe.

XPO says NewCo would benefit from a burgeoning e-commerce and reverse logistics service market in North America incorporating XPO Direct™, a shared-space distribution network with the flexibility to reposition customer inventories close to demand. As of 30 September 2020, XPO had asset-light logistics operations in 27 countries, with approximately 58,000 employees and 766 locations.

A presentation that summarises the intended spin-off transaction will be available on the investor relations area of the company’s website,, from Wednesday, 2 December 2020, at 4:30 p.m. Eastern Time until 1 January 2021.

Meanwhile in France XPO has purchased 80 IVECO S-Way 460 alternative fuel tractors. The new units, which use, replace older diesel tractors in the company’s less-than-truckload fleet. XPO’s road fleet in France now includes more than 250 LNG vehicles. Many of XPO’s older assets are of course those which the company acquired with its takeover of Norbert Dentressangle in 2015.

In addition, XPO invested in 500 vehicles manufactured by Renault Trucks, including tractor-trailers and straight trucks with Euro VI-compliant engines, the strictest diesel standard for emissions control. The vehicles replace older equipment in the company’s full truckload and less-than-truckload fleets in France and feature the latest technologies for driver safety and comfort. Jean-Emmanuel Mongnot, managing director, transport, France, XPO Logistics, said:

“Our ongoing investments in greener supply chains are an important part of our strategy as a sustainable business. We will continue to partner with industry suppliers to ensure that our customers have access to the latest developments in transport efficiency and safety.”

In a move many operators are likely to follow, XPO is currently deploying Goodyear Drive-Over-Reader technology in eight of its transport hubs in France. The ground-mounted sensors, which measure tyre pressure, tread depth, axle load and vehicle weight, are designed to reduce fuel consumption and maintenance costs and proactively reduce tyre-related accidents.