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XPO Logistics explores sale or spin-off of one or more of its businesses

Brian Sozzi
Editor-at-Large

Consummate deal-maker Bradley Jacobs — aka XPO Logistics CEO — may be about to pull the trigger on his latest big transaction. Not for another outside trucking or logistics company, but quite possibly for large chunks of his shipping business he has built up since 2011.

XPO Logistics (XPO) said Wednesday evening that its board of directors has authorized a review of strategic alternatives. The review, according to XPO Logistics, will include the possible sale or spin-off of one or more of its business units.

XPO Logistics said a timetable of the review process has not been determined. It has no intention of selling or spinning off its North American less-than-truckload unit. XPO Logistics operates in 32 countries — it’s unclear if XPO is considering unloading its overseas operations and focusing squarely on the U.S. 

The press release declined to say whether XPO Logistics would be open to selling itself in entirety if the right deal came along. A source familiar with the matter said the entire XPO business is not for sale. But, the market may be reading that as a strong possibility — which is usually the normal takeaway when a company announces it is exploring strategic alternatives of any kind.

XPO shares surged 16% in after-hours trading on the news.

“XPO is the 7th best-performing stock of the last decade on the Fortune 500, based on Bloomberg market data. The share price has increased more than 10-fold since our investment in 2011. Still, we continue to trade below the sum of our parts, and at a significant discount to our pure-play peers. That’s why we believe the best way to continue to maximize shareholder value is to explore our options, while remaining intensely committed to the satisfaction of our customers and employees,” Jacobs said in a statement.

Investing in the last mile

Jacobs primarily built XPO Logistics through acquisitions. He purchased a whopping 17 companies in a stretch from 2011 (when XPO Logistics was founded) to 2015. The company hasn’t made an acquisition since the 2015 purchase of trucker Con-way for $3 billion. Although Jacobs was rumored to be eyeing several acquisitions in October, per comments made on the company’s third quarter earnings call.

Instead, since 2015, Jacobs has sought to invest aggressively in XPO Logistics’ last-mile delivery capabilities to become an even more integral partner to major retailers shipping items from online. He has further boosted investments in robots to speed up freight unloading and technology to better schedule employee work hours.

More recently, XPO Logistics took out $1 billion in debt to fund stock buybacks following key customer Amazon scaling back orders. The decision by Amazon — which is building out its own logistics fleet — came to light in February 2019 and hammered XPO Logistics’ stock. The stock has rebounded on the back of the repurchase activity — it’s up about 35% over the past year.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Watch The First Trade each day here at 9:00 a.m. ET. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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