The $710 million cash deal brings XPO closer to its goal of becoming a pure-play trucking company by the end of 2022
A freight train carries shipping containers along the U.S.-Mexico border between New Mexico and Chihuahua state in Sunland Park, New Mexico.
PHOTO: PATRICK T. FALLON/AGENCE FRANCE-PRESSE/GETTY IMAGES
XPO Logistics Inc. sold its North American intermodal segment for about $710 million, further unwinding a sprawling transportation business built up through a decade of acquisitions.
The sale to freight and warehousing provider STG Logistics Inc., which XPO said was completed Thursday and was announced Friday, brings Greenwich, Conn.-based XPO closer to its goal of becoming a stand-alone provider of less-than-truckload services, in which shippers combine multiple loads on the same truck.
XPO Chief Executive Brad Jacobs said the cash deal is “a key step in preparing for our planned spinoff” and simplifies the company’s business model.
STG CEO Paul Svindland said the acquisition will sharply expand the company’s reach in intermodal freight transport, in which containerized goods move by a combination of rail and truck transport. The Bensenville, Ill.-based company’s services include warehousing, e-commerce fulfillment, rail transportation and the final leg of product deliveries.
“We’re just taking on more of a focus in the mode that is most relevant to us and our success and our customers,” Mr. Svindland said.
STG’s acquisition adds 700 employees to its 800-person workforce, and brings in 11,000 containers and 2,200 tractors, according to the company. The deal more than doubles STG’s facility count, to 76 sites from 28.
The expansion gives STG more capacity in a strained intermodal market, particularly in major gateways including Southern California and New Jersey, Mr. Svindland said.
“That is very paramount to our success,” he said. “And so, in essence, we are vertically integrated now. We now have the ability to control the move from the port to our facility.”
Stephens Inc. analysts wrote in a Friday note that XPO would likely use funds from the sale to pay down debt as it works toward an investment-grade credit rating.
The sale came weeks after XPO, one of the largest logistics companies in North America, announced plans to spin off its brokerage segment and strip away its European business, leaving behind less-than-truckload operations XPO acquired in 2015.
XPO spun off its contract logistics business, now called GXO Logistics Inc., last year.
Mr. Jacobs said in an interview earlier this month that dismantling the company after years of expansion would allow management to be more focused, and that customers and shareholders alike preferred pure-play businesses.