Supply chain services provider XPO Logistics is buying US transport and logistics provider Con-way for $3 billion. The deal is expected to close in October this year subject to regulatory approval. XPO said the buyout will make it the
The takeover is one of the largest in a growing list that XPO has made over the past two years. Most recently it bought Norbert Dentressangle for $ $3.5 billion.
That followed takeovers of Pacer International, New Breed Holdings and National Logistics Management amongst others.
Bradley Jacobs, chairman and CEO of XPO, said that the company currently generates just over $9 billion of annual revenue globally, but it would grow that to $15 billion of revenue on a pro forma basis when it closed the deal with Con-way, equal to an increase of more than $5 billion.
“Both XPO and Con-way have deep relationships within the automotive sector, and we provide complementary transport services in the cross-border Mexico corridor,” Jacobs told Automotive Logistics. “We don’t give the details of our business mix by vertical for competitive reasons, but it’s fair to say that automotive has been, and will continue to be, one of the important customer verticals we serve at XPO.”
Fresh pair of eyes
The takeover of Con-way includes its subsidiary companies Con-way Freight, Menlo Logistics, Con-way Truckload and Con-way Multimodal. All will now be rebranded as XPO Logistics. Douglas Stotlar, Con-way's president and CEO, will work as an independent advisor to the combined company through the first quarter of 2016.
Jacobs went on to say that one of the “crown jewels” in the acquisition of Con-way was the Menlo Logistics division, which was highly complementary with XPO’s current operations.
“Menlo also has a strong presence in automotive with its managed transportation business,” he noted. “Our combined managed transportation spend will be approximately $2.7 billion, which will give us a huge influx of data that we can use to drive efficiencies for our customers.”
More generally, he said XPO had been interested in filling the LTL gap in its service offering for some time, mainly because it was a service that is used by nearly all of its customers.
“From a broader perspective, LTL is a $35 billion market in North America with attractive fundamentals – it’s a high-value-add business,” noted Jacobs. “Con-way is a premier LTL platform that we’ll run with a fresh set of eyes as part of our end-to-end supply chain offering.”
Capacity for continuity
Jacobs was also keen to point out that the purchase of Con-way would give it a strategic ownership of assets that would benefit the company and its customers during periods of tight capacity.
Tight capacity is a defining term for the automotive industry in North America at the moment. Asked about how XPO’s latest acquisition was likely to benefit the vehicle-making sector in North America, Jacobs told Automotive Logistics that it was about putting the assets to best use within its own highly integrated organisation.
“Shippers are rightfully concerned about capacity tightening in the future and we’ll be taking control of massive capacity to ensure service continuity,” said Jacobs. “The automakers and other large shippers make asset ownership a requirement for a large part of their outsourced business. Our blended transportation model of owned, brokered and contracted capacity will help us better serve our automotive customers in North America, just as it currently does for us in Europe.”
It will do that by integrating its service offering to benefit the combined customer pool, said Jacobs.
“We’ll integrate Con-way’s LTL, truck brokerage, truckload, contract logistics and managed transportation networks with XPO,” he said. “We’ll cross-sell LTL and dedicated truckload services to the automakers we currently serve, and offer our transportation capabilities in truck brokerage, intermodal, drayage, ground and air expedite, and last mile to Con-way customers.
The absorbing of Con-way’s assets will increase XPO's global ground transport network to approximately 19,000 owned tractors and 46,000 owned trailers, as well as 10,000 trucks contracted through independent owner operators. It will also give XPO access to more than 50,000 independent carriers.
In addition to transport assets, XPO said the purchase will add 160 facilities to its footprint, equal to 14m sq.m.
In North America, XPO will have approximately 11,000 owned tractors and 33,000 owned trailers, 6,000 trucks contracted through independent owner operators, and access to more than 38,000 independent carriers.
Growth in those assets is going to benefit XPO’s provision of services to the North American automotive sector.
It will also increase XPO’s provision of cross-border Mexico services. “In cross-border Mexico, where we’re already a major player, we’ll gain a truckload business that realises about 35% of its revenue from cross-border volumes,” Jacobs continued. “We also see an opportunity to create a true multi-modal solution for some of the long-haul LTL movements by incorporating rail. These are all opportunities for us to serve our automotive customers more completely and with greater efficiency.”
Bradley Jacobs will be speaking at this month’s Automotive Logistics Global conference in Detroit which begins on 22nd September.