RXO to acquire Coyote Logistics from UPS

Two RXO Freightliner Cascadias on highway.

RXO has entered into a definitive agreement to acquire Coyote Logistics, an asset-light freight brokerage business, for $USD1.025 billion from UPS.

The acquisition is expected to enhance RXO’s market position, diversify and expand its customer base, and broaden its carrier network.

At closing, RXO will be the third-largest provider of brokered transportation in North America.

“RXO’s highly accretive acquisition of Coyote will immediately increase the scale of our brokerage business, providing customers with more capacity across a wider array of power lanes,” said Drew Wilkerson, RXO Chief Executive Officer.

“RXO will realise significant synergies from the acquisition by quickly integrating Coyote’s business into RXO and leveraging our cutting-edge technology. The addition of Coyote’s customer base will diversify RXO’s vertical mix and will increase the number of customers that do more than $1 million in business with us by approximately 80 per cent.

“This acquisition will provide RXO with both immediate and long-term opportunities for revenue and earnings growth and will generate significant returns for shareholders. I look forward to welcoming Coyote’s employees to our team and working together to achieve excellent results for our customers, shareholders, carrier partners and employees for years to come.”

The transaction is expected to be immediately and significantly accretive to RXO’s adjusted diluted earnings per share and adjusted free cash flow.

Under the terms of the agreement, RXO will pay $USD1.025 billion in cash for Coyote.

RXO will continue to serve UPS’s brokered transportation needs under a contract that runs through January 2030.

The acquired business generated approximately $USD3.2 billion in revenue in 2023 with approximately $USD470 million in gross margin and approximately $USD86 million of adjusted EBITDA[1].

RXO expects annualised cost synergies of at least $USD25 million.

The transaction will be funded with a mix of equity and debt, including a $USD300 million equity investment from MFN Partners and a $USD250 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 Board of Directors has unanimously approved the transaction, which is subject to customary closing conditions and regulatory approvals and is expected to close by the end of 2024.

Goldman Sachs & Co. LLC is serving as financial advisor to RXO, and Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as its legal advisor.

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