This article was updated at 8:30 a.m. CDT
GREENWICH, Conn. and ANN ARBOR, Mich. — XPO Logistics and Con-way Inc. Wednesday announced that they have entered into a definitive agreement for XPO Logistics to acquire Con-way.
The companies said the deal is valued at $2.72 billion, or $3 billion including $290 million in debt.
All of the acquired operations — Con-way Freight, Menlo Logistics, Con-way Truckload and Con-way Multimodal - will be rebranded as XPO Logistics.
"This landmark transaction provides immediate cash value for our shareholders and reflects the outstanding contributions of our employees over our 86-year history,” said Douglas Stotlar, Con-way’s president and chief executive officer said. “The combination will mean more services for our customers, more miles for our drivers, and more career opportunities for our employees as part of XPO's global organization. We look forward to working with the XPO team to complete the transaction and ensure a smooth transition."
The transaction will enhance XPO's range of supply chain solutions by making XPO the second largest less-than-truckload provider in North America, and will expand the company's global contract logistics platform, according to Bradley Jacobs, chairman and CEO of XPO Logistics.
XPO will also capitalize on synergies from the combination with Con-way's managed transportation, truckload and freight brokerage businesses, he said.
Headquartered in Ann Arbor, Michigan, Con-way is a Fortune 500 company with a transportation and logistics network of 582 locations and approximately 30,000 employees serving over 36,000 customers.
For the full year 2015, consensus analysts' estimates for Con-way are $5.7 billion of revenue and $528 million of adjusted EBITDA.
The transaction is expected to be substantially accretive to XPO's earnings in the first 12 months.
XPO intends to raise its year-end 2015 target run rates for revenue and EBITDA, and issue new long-term targets, upon completion of the acquisition.
Under the terms of the agreement, XPO will launch a tender offer for all of Con-way's outstanding shares at a cash price of $47.60 per share.
Following the tender offer, if successful, Con-way will merge with a subsidiary of XPO, becoming a wholly owned subsidiary of XPO, and all remaining outstanding shares of Con-way will receive the same consideration paid to stockholders who participated in the tender offer.
Jacobs will retain his positions and lead the combined company.
Stotlar will serve in a limited role as an independent advisor to the combined company through the first quarter of 2016.
The transaction is not conditioned on financing. XPO has received committed financing from Morgan Stanley in the aggregate amount of $2.0 billion. The company has approximately $1.2 billion in cash and an undrawn $415 million ABL revolver, and Con-way has approximately $424 million of cash. XPO expects to substantially increase its ABL capacity based on the addition of receivables from the acquisitions of Norbert Dentressangle and Con-way.
The transaction is expected to close in October following the successful completion of the tender offer and subject to the satisfaction of customary conditions, including regulatory approvals. The boards of directors of XPO and Con-way have unanimously approved the transaction.
"Our opportunistic acquisition of Con-way will make XPO the second largest provider of less-than-truckload transportation in North America, a $35 billion market. LTL is a non-commoditized, high-value-add business that's used by nearly all of our customers,” Bradley said. “Con-way is a premier platform that we will run with a fresh set of eyes as part of our broader offering. Importantly, we'll gain strategic ownership of assets that will benefit our company and our customers during periods of tight capacity.
"Another crown jewel in this transaction is Con-way's subsidiary, Menlo Logistics, an asset-light top 30 global contract logistics provider with additional lines of business in freight brokerage and managed transportation. Menlo serves blue chip contract logistics customers in verticals such as high tech, healthcare and retail, which complement the verticals we serve at XPO."
The company will further its growth strategy with the addition of Con-way's transportation and logistics platform, Bradley said.
“XPO will offer best-in-class LTL services to its 16,000 customers in North America as the second largest LTL provider, with world-class capabilities for reliable, time-definite service,” he said. “Nearly all of XPO's current brokerage customers require LTL transportation, and the majority of Con-way's 36,000 customers can utilize multiple XPO services.”
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