In a strategic move to bolster its presence in the North American transportation sector, RXO (NYSE: RXO) has announced its definitive agreement to acquire Coyote Logistics from UPS for $1.025 billion in cash. This acquisition is set to propel RXO to the forefront as the third-largest provider of brokered transportation in the region, significantly enhancing its market position and expanding its operational capacity.
Drew Wilkerson, CEO of RXO, highlighted the transformative impact of this acquisition: “RXO’s highly accretive acquisition of Coyote will immediately increase the scale of our brokerage business, providing customers with more capacity across a wider array of power lanes. We are poised to realize substantial synergies by integrating Coyote’s operations swiftly and leveraging our advanced technology.”
Coyote Logistics, known for its asset-light freight brokerage services, generated approximately $3.2 billion in revenue in 2023, with $470 million in gross margin and $86 million in adjusted EBITDA. This acquisition not only diversifies RXO’s customer base but also strengthens its vertical mix, expanding the number of customers with over $1 million in business by approximately 80%.
The transaction, expected to close by the end of 2024 pending regulatory approvals, underscores RXO’s commitment to driving revenue and earnings growth while delivering significant shareholder returns. The company anticipates annualized cost synergies of at least $25 million, further enhancing operational efficiency and profitability.
To fund the acquisition, RXO will utilize a combination of equity and debt, including substantial investments from two of its largest shareholders: $300 million from MFN Partners and $250 million from Orbis Investments. This financing structure is fully committed and expected to maintain neutral leverage levels post-transaction.
Goldman Sachs & Co. LLC is acting as RXO’s financial advisor, with legal counsel provided by Paul, Weiss, Rifkind, Wharton & Garrison LLP. The RXO Board of Directors has unanimously approved the transaction, which aligns with the company’s strategic growth objectives and enhances its competitive position in the logistics sector.
In conjunction with this announcement, RXO reaffirms its second-quarter adjusted EBITDA outlook of between $24 million and $30 million, demonstrating confidence in its operational performance amid strategic expansion initiatives.
