RXO Acquires Coyote Logistics for $1.025 Billion

RXO Acquires Coyote Logistics for $1.025 Billion

RXO has announced a definitive agreement to acquire Coyote Logistics from UPS for $1.025 billion. This move is set to solidify RXO's position as a leading provider of brokered transportation in North America, making it the third-largest in the sector upon closing.

Strategic Expansion and Synergy

The acquisition of Coyote Logistics, an asset-light freight brokerage business, will significantly boost RXO's market presence. RXO plans to integrate Coyote's operations swiftly, leveraging advanced technology to enhance service offerings and operational efficiency. This integration aims to provide customers with increased capacity across various power lanes and to diversify RXO’s customer base.

Financial Impact and Growth Potential

The transaction is projected to be highly beneficial to RXO's financial performance, with immediate and significant positive effects on adjusted diluted earnings per share and adjusted free cash flow. Coyote's operations, which generated approximately $3.2 billion in revenue in 2023, are expected to contribute substantially to RXO's revenue and earnings growth. Additionally, RXO anticipates annualized cost synergies of at least $25 million.

Funding and Financial Support

To finance the acquisition, RXO will utilize a combination of equity and debt. This includes significant equity investments from MFN Partners and Orbis Investments, two of RXO’s largest shareholders, contributing $300 million and $250 million, respectively. The transaction is supported by fully committed financing and is expected to maintain RXO's current leverage levels.

Continued Partnership with UPS

Under the agreement, RXO will continue to handle UPS's brokered transportation needs through a contract that extends until January 2030. This ongoing partnership ensures a steady revenue stream and operational continuity post-acquisition.

Approval and Timeline

RXO’s Board of Directors has unanimously approved the transaction, which is subject to customary closing conditions and regulatory approvals. The acquisition is expected to close by the end of 2024.

Advisory and Outlook

Goldman Sachs & Co. LLC is serving as financial advisor to RXO, with Paul, Weiss, Rifkind, Wharton & Garrison LLP acting as legal advisor. RXO has reaffirmed its second-quarter adjusted EBITDA outlook, projecting adjusted EBITDA between $24 million and $30 million.

Conference Call Details

RXO will hold a conference call and webcast to discuss the acquisition on Monday, June 24, at 8:00 a.m. EDT. Participants can join the call toll-free from the U.S./Canada at +1-888-259-6580, or internationally at +1-206-962-3782, using conference ID 58041361. A live webcast and replay of the call will be available on the investor relations section of RXO's website, investors.rxo.com.