RXO Agrees to Buy Coyote Logistics From UPS for $1.025 Billion
The deal announced June 23, 2024, would make RXO the third-largest freight broker in North America, while UPS would sell the unit for less than it paid in 2015.
RXO said on June 23, 2024, that it had agreed to acquire Coyote Logistics, the freight brokerage owned by UPS, for $1.025 billion in cash. RXO said the combined company would be the third-largest provider of brokered transportation in North America once the deal closed.
UPS bought Coyote from private equity firm Warburg Pincus for about $1.8 billion in 2015, Transport Topics reported.
The numbers
Coyote, founded in 2006, works with a network of 100,000 carriers to move freight for 15,000 customers, according to RXO. The business generated about $3.2 billion in revenue in 2023, with about $470 million in gross margin and about $86 million in adjusted EBITDA, figures RXO described as preliminary.
RXO, based in Charlotte, N.C., expected at least $25 million in annual cost savings from combining the businesses. It planned to fund the purchase with a mix of equity and debt, including a $300 million equity investment from MFN Partners and a $250 million investment from Orbis Investments, two of its largest shareholders. Under the agreement, RXO would continue to handle UPS's brokered transportation needs under a contract running through January 2030.
The deal required customary closing conditions and regulatory approvals and was expected to close by the end of 2024.
Why both sides did it
"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," RXO CEO Drew Wilkerson said. He said Coyote's customers would increase the number of RXO customers doing more than $1 million in business with the company by about 80%.
For UPS, the sale was about focus. "As UPS positions itself to become the premium small-package provider and logistics partner in the world, the decision to sell our Coyote Logistics business allows an even greater focus on our core business," UPS CEO Carol Tomé said.
TD Cowen called the price reasonable at about nine times anticipated EBITDA for 2025, TT reported. "The deal is expected to make RXO the third-largest freight brokerage in North America, moving up five spots," TD Cowen analyst Jason Seidl wrote.
Coyote ranked No. 4 on Transport Topics' list of top freight brokerage firms, and RXO ranked No. 20 on its list of the largest logistics companies.
What it means for drivers and fleets
For carriers and owner-operators who haul brokered loads, the June 2024 agreement meant two large load sources would eventually become one. Carriers set up with both Coyote and RXO could expect changes in load boards, apps, onboarding and payment processes once the businesses were combined, and fewer separate brokers bidding on the same freight. Small fleets that rely heavily on either broker would want to watch for changes in payment terms and carrier requirements as integration plans emerged.