XPO Logistics pulls plug on plan to vet strategic alternatives through plan to offload some units

Following a mid-January announcement in which it said it is vetting strategic alternatives through the spin off or sale of some business units, Greenwich, Conn.-based XPO Logistics, a provider of global freight transportation and logistics services said in an 8-K statement filed with the United States Security and Exchange Commission (SEC) today that is no longer the case.

“On January 15, 2020, XPO Logistics, Inc. announced that its board of directors had authorized a review of strategic alternatives, including the possible sale or spin-off of one or more of XPO’s business units,” the company said in the 8-K statement. “In light of current market conditions, XPO has terminated the strategic review process.”

XPO said in mid-January that its board of directors authorized a review of strategic alternatives, which included the possible sale, or spin-off, of one or more of its business units, with the exception of its North American less-than-truckload unit, which is second in profit behind Old Dominion Freight Line (ODFL) and third in revenue behind FedEx and ODFL. And it added, at the time, that there was “no assurance of any specific outcome” and no specific timetable for the completion of the review process or which, if any, of its business units would be sold or spun off.

During its nearly ten-year existence, XPO has made myriad significant investments, with perhaps the two most high-profile ones coming in 2015, when it brought both Lyon, France-based 3PL Norbert Dentressangle SA into the fold for $3.53 billion to boost its European presence, and Con-way in September 2015 for $3 billion, which made it one of the top LTL providers in North America and also expand its global contract logistics, managed transportation and freight brokerage businesses. Since Jacobs took the helm and established XPO, the company made 17 acquisitions between March 2012 and October 2015.

In an recent interview with LM, XPO Chairman and CEO Brad Jacobs explained XPO Logistics was exploring possible sales or spin-offs for four of its business units: European Supply Chain; North American Transportation (minus LTL), Supply Chain for the Americas and Asia Pacific.

“We do not intend to sell our North American LTL business, given the growth trajectory and because we believe that LTL as a standalone company would be well understood if properly valued,” he said. “We have a fantastic track record of creating tremendous shareholder value, and we think this process we are undertaking could be a way to create more value this year.”

But since that time market conditions have change considerably, making it no surprise that XPO has terminated the strategic review process, observed Ben Gordon, Managing Partner of Cambridge Capital, an investor in niche supply chain leaders and also Managing Partner of BGSA Holdings.

“In the current market conditions, there is just too much uncertainty,” noted Gordon. “Like most public companies, XPO’s stock has been hit hard by coronavirus and recession fears. Brad and the XPO board would likely view the deal process as an unnecessary distraction. They are probably better off focusing on growing the business and ignoring all the short-term noise.”