By 24/7 Staff / www.supplychain247.com / January 25th, 2021
The approximately US$800 Million enterprise value transaction will combine LTL networks in the United States and Canada projected to provide the most extensive North American coverage, accelerating industrial and ecommerce growth opportunities.
TFI International Inc. (NYSE and TSX: TFII), a North American leader in the transportation and logistics industry, today announced that it has signed a definitive agreement to acquire UPS Freight, the less-than-truckload (LTL) and dedicated truckload (TL) divisions of United Parcel Service, Inc. (NYSE: UPS), for US$800 million on a cash-free, debt-free basis before working capital and other adjustments.
Approximately 90% of the acquired business will operate independently within TFI International’s LTL business segment under its new name, “TForce Freight”, while acquired dedicated TL assets will join TFI’s TL business segment.
The transaction is subject to usual and customary closing conditions, including regulatory approvals.
Alain Bédard, Chairman, President, and Chief Executive Officer of TFI International, commented on the transaction;
“We are pleased to announce this highly strategic transaction that will strengthen our service offerings to customers as well as our ongoing relationship with UPS. Our strategy of operating independent business units with a high degree of accountability is well-suited for building on UPS Freight’s strengths and improving margins over time. TForce Freight will continue to serve UPS’ ongoing LTL distribution needs, and UPS will continue to provide freight volumes and other services to TForce Freight after the transaction for a base term of five years. We also look forward to offering expanded strategic network opportunities to UPS in Canada. This transaction is a ‘win-win’, allowing TFI to continue our strategic expansion across the US and aligning with UPS’ ‘Better not Bigger’ strategic positioning.”
Mr. Bedard continued, “We’re excited by this very attractive opportunity to extend our longstanding record of successful growth through acquisition, which will vault TFI International to one of the largest North American LTL carriers. The assets acquired include a network of 197 facilities (147 of which are owned), and combined with TFI’s Canadian LTL operations, will create what we believe to be North America’s single most comprehensive LTL network, especially as we continue our expansion into Mexico leveraging our existing LTL brokerage operations there. Given our soon to be expanded, comprehensive, and highly efficient network, we’re eager to work with our new colleagues to optimize performance and are very pleased to welcome the entire UPS Freight family to TFI International.”
“In particular, we see compelling opportunities to improve TForce Freight’s efficiency and productivity and apply our proven business model to drive long-term value creation. We look forward to the new TForce Freight thriving in the years ahead under the TFI International umbrella,” Mr. Bedard concluded.
The acquisition also helps with TFI’s expansion into Mexico that is leveraging its existing LTL brokerage operations there. “Given our soon to be expanded, comprehensive, and highly efficient network, we’re eager to work with our new colleagues to optimize performance and are very pleased to welcome the entire UPS Freight family to TFI International,” Bedard added.
For UPS, the world’s largest transportation company that did $74 billion in revenue in 2019, the last full year for which statistics are compiled, the sale is a tacit admission that the 2005 Overnite acquisition wasn’t working.
For her part, Tome said the move made strategic sense at Atlanta-based UPS.
“We’re excited about the future and the opportunities this creates for both UPS and UPS Freight as part of TFI International Inc.,” UPS Chief Executive Officer Carol Tomé said in a statement. “The agreement allows UPS to be even more laser-focused on the core parts of our business that drive the greatest value for our customers.”
UPS said its decision to sell UPS Freight was reached following a thorough evaluation of the UPS portfolio. It aligns with the company’s newly coined “better, not bigger” strategic positioning.
Is $800 million a fair price? That depends.
The sale is described by TFI as “cash-free and debt-free.” But it does give TFI a huge footprint in the U.S. LTL market and internationally in Mexico.
“In particular, we see compelling opportunities to improve TForce Freight’s efficiency and productivity and apply our proven business model to drive long-term value creation,” Bedard said. “We look forward to the new TForce Freight thriving in the years ahead under the TFI International umbrella.”
UPS and TFI International will also enter into an agreement for UPS Freight to continue to use UPS’ domestic package network to fulfill shipments for a period of five years.
The transaction is expected to close during this year’s second quarter. UPS said it expects to recognize a non-cash, pre-tax impairment charge of approximately $500 million on its statement of consolidated income for last year. Goldman Sachs & Co. LLC is serving as financial advisor.
With an operating history of over 85 years, UPS Freight is one of the largest LTL carriers in the U.S., offering a full range of regional and long-haul solutions and an on-time delivery guarantee for all LTL shipments and is headquartered in Richmond, Va.
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