RxO, a leading provider of asset-light transportation solutions, has announced its definitive agreement to acquire Coyote Logistics from UPS for $1.025 billion in cash. This strategic transaction is expected to make RxO the third-largest provider of brokered transportation in North America upon closing. The acquisition is projected to immediately and significantly increase RxO's scale in the brokerage business, providing customers with more capacity across a wider array of power lanes.
Coyote Logistics, the acquired business, generated approximately $3.2 billion in revenue in 2023, with approximately $470 million in gross margin and approximately $86 million of adjusted EBITDA. RxO expects annualized cost synergies of at least $25 million from the acquisition.
The transaction will be funded with a mix of equity and debt, including a $300 million equity investment from MFN Partners and a $250 million equity investment from Orbis Investments, two of RxO’s largest shareholders. The transaction is backstopped by fully committed financing and is expected to be neutral to leverage.
RxO's highly accretive acquisition of Coyote is expected to immediately increase the scale of its brokerage business, providing significant synergies through the integration of Coyote’s business and leveraging cutting-edge technology. The addition of Coyote’s customer base is anticipated to diversify RxO’s vertical mix and increase the number of customers that do more than $1 million in business with RxO by approximately 80%.
The transaction is subject to customary closing conditions and regulatory approvals and is expected to close by the end of 2024. RxO's board of directors has unanimously approved the transaction, and Goldman Sachs & Co. LLC is serving as financial advisor to RxO, with Paul, Weiss, Rifkind, Wharton & Garrison LLP serving as its legal advisor.
RxO also reaffirms its second-quarter adjusted EBITDA outlook and continues to expect adjusted EBITDA between $24 million and $30 million. The company will hold a conference call and webcast to discuss the planned acquisition on June 24, 2024.
Upon completion, this acquisition is expected to enhance RxO’s market position, diversify and expand its customer base, and broaden its carrier network, providing both immediate and long-term opportunities for revenue and earnings growth while generating significant returns for shareholders. As a result of these announcements, the company's shares have moved 21.0% on the market, and are now trading at a price of $24.45. Check out the company's full 8-K submission here.
