XPO Logistics to Acquire Pacer International

XPO Logistics has announced plans to acquire Pacer International, the third largest provider of intermodal transportation services in North America. The combined company will continue to trade on the New York Stock Exchange under the symbol XPO.

Pacer is also the largest provider of intermodal services in the fast-growing cross-border Mexico market.

A few specifics of the deal include:

• Cash and stock transaction valued at $335 million expected to be significantly and immediately accretive to earnings
• Complementary service offerings will create significant opportunities to expand customer relationships
• Transaction will double XPO’s annual revenue run rate to $2 billion

Under the terms of the proposed transaction, shareholders of Pacer will receive $6.00 in cash and $3.00 of XPO Logistics common stock for each share of Pacer common stock, subject to a price collar, for a total market value of $335 million and a total enterprise value of $296 million. The transaction is expected to close in the second quarter of 2014, subject to regulatory clearance, Pacer shareholder approval and other customary conditions. Pacer’s board of directors unanimously approved the transaction.

Pacer, founded in 1997, facilitates approximately 10 percent of all domestic intermodal freight movements, and is the largest provider of intermodal services between the U.S. and Mexico. For the trailing 12 months ended November 30, 2013, Pacer generated total revenue of $1.0 billion, with 30 locations and approximately 950 employees.

Bradley Jacobs, chairman and chief executive officer of XPO Logistics, said, “We’ve viewed Pacer as a valuable acquisition candidate for quite a while. This transaction will make us the third largest North American provider of intermodal services, one of the fastest-growing areas of transportation logistics. We’ll also be the largest provider of intermodal services in the burgeoning cross-border Mexico market, where growth is being driven by a trend toward near-shoring manufacturing. We expect this transaction to be significantly and immediately accretive to our earnings and accelerate our growth company-wide.”

Jacobs continued, “In the last few months, we’ve added leading platforms in some of the fastest-growing areas of logistics: our 3PD last-mile business, our purchase of NLM – the leader in web-managed transportation for expedite – and now Pacer, our eleventh acquisition in two years. When this transaction is complete, we believe that our value proposition for customers will be among the strongest in the industry.”

Compelling Strategic Rationale

• The capabilities of both companies are considered complementary. Many of XPO’s 9,500 customers are small to mid-sized shippers and are candidates for conversion to intermodal for their long-haul freight spend. In addition, Pacer’s existing customer base will have direct access to the freight brokerage, last-mile logistics and expedited transportation services offered by XPO. In total, the combined company will serve approximately 12,000 customers with expanded capacity and a broader range of services that should generate significant revenue growth.
• The intermodal sector in North America has been growing at a rate of three to five times GDP, driven by an increase in shipper appreciation for the benefits of intermodal. These benefits include cost efficiencies of up to 15 percent to 20 percent, compared to trucking options; and the environmentally-friendly nature of rail’s fuel consumption and carbon footprint.
• Cross-border Mexico is one of the fastest-growing intermodal marketplaces in North America, due to a strong tailwind in near-shoring by manufacturers. This is being driven by the relatively lower cost of shipping finished goods from Mexico versus overseas locales such as China; faster speed-to-market; an attractive cost of labor; significant investments by the Mexican government and railroads in the country’s transportation infrastructure; and a business-friendly environment.
• The acquisition is consistent with XPO’s strategy of building a premier supply chain offering by acquiring leading positions in the fastest-growing logistics sectors in North America. In August, XPO acquired 3PD, the largest provider of heavy goods, last-mile logistics. In December, the company acquired NLM, the leading provider of web-based freight management services for the expedite sector.
• The timing of the transaction aligns with a favorable shift in customer behavior: many shippers are choosing to consolidate 3PL services with fewer and larger providers that have deep capacity and a broad range of services. XPO expects to significantly strengthen its relationships with customers through its enhanced value proposition.
• Both companies have similar customer-centric cultures that inspire world-class service. XPO will benchmark the most effective practices of both organizations to create best-in-class recruitment, training, IT, marketing, sales, service and carrier procurement programs.

More information at: www.xpologistics.com and at: www.pacer.com.

 

 

 

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Tags: intermodal transportation, Pacer International, XPO Logistics

Category: General Update