The stock price of XPO Logistics fell from $114 per share in September of 2018 to just $46 in early March 2019, after a short seller report sent XPO's stock price tumbling and scuttled a planned acquisition. After another rise and then fall back to $40 per share in March of this year, smart investors would have done well to continue to bet on CEO Brad Jacobs.
Supply Chain Digest Says...
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Between 2011 and 2015, XPO under Jacobs executed a rapid series of acquisitions to build an operation that quickly moved it into the top ranks of logistics providers. |
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From those March lows, XPO Logistics has been on a tear, first rising to more than $90 per share on the strength of strong growth in earnings and plans for a "strategic review" of company options, including possibly selling off business units. It now has surged to around $119 a share after it announced last week that it was going to split itself in two, with plans for spinning off its contract logistics operations into a separately publicly traded company
As spokesperson for XPO told The Loadstar web site that "For a while, we couldn't understand how many of our peers, great companies though they are, were trading at multiples of 15x, 16x or 17x EBDTA, while we were trading under 10."
Talks with investors uncovered that many felt XPO's structure across a variety of logistics functions was too complex and that the company needed to reduce its debt.
In a statement, XPO said if completed, 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 transport; and NewCo, the second-largest contract logistics provider in the world.
No word on what the real names of the two new companies will be.
Jacob's stated that "We currently believe this spin-off is the most effective way to unlock significant value for our customers, employees and shareholders."
Jacobs will be chairman and CEO of trucking XPORemainCo and also be chairman of NewCo; Troy Cooper will serve as XPORemainCo president.
While the move immediately rewards XPO shareholders, it also ends Jacob's vision to build an end-to-end logistics firm, a vision undone in the end because the market would not set a price for the whole that equaled the sums of its parts.
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 Between 2011 and 2015, XPO under Jacobs executed a rapid series of acquisitions to build an operation that quickly moved it into the top ranks of logistics providers and grew to $16.65 billion in revenue last year.
In its transportation businesses, XPO is the third-largest U.S. less-than-truckload company by 2019 revenue, according to SJ Consulting Group Inc., and the second-largest provider of domestic transportation management and freight brokerage, according to research firm Armstrong & Associates.
XPO also has a significant last-mile delivery business for large, bulky items, with demand surging as consumers have ordered more of items such as furniture and exercise equipment on-line in the face of stay at home work and leisure lifestyles under the virus pandemic.
XPO is the second-largest North American warehouse 3PL, based on square feet under management, according to data from Armstrong & Associates.
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