RXO to Acquire Coyote Logistics from UPS for US$1.03 Billion

Leading provider of asset-light transportation solutions RXO announced on Sunday that it has entered into a definitive agreement to acquire Coyote Logistics from UPS for US$1.025 billion. This acquisition will bolster RXO’s market presence, diversify its customer base, and enhance its carrier network. Upon completion of the deal, RXO will become the third-largest brokered transportation provider in North America.

“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 will realize significant synergies from the acquisition by quickly integrating Coyote’s business into RXO and leveraging our cutting-edge technology,” says Drew Wilkerson, CEO, RXO. 

The transaction is expected to be immediately and significantly accretive to RXO’s adjusted diluted earnings per share and adjusted free cash flow. Under the terms of the agreement, RXO will pay US$1.03 billion in cash for Coyote Logistics. RXO will continue to serve UPS’s brokered transportation needs under a contract that extends through January 2030.

“The addition of Coyote’s customer base will diversify RXO’s vertical mix and will increase the number of customers that do more than US$1 million in business with us by approximately 80%. This acquisition will provide RXO with both immediate and long-term opportunities for revenue and earnings growth and will generate significant returns for shareholders,” says Wilkerson.

In 2023, Coyote generated about US$3.2 billion in revenue, with around US$470 million in gross margin and about US$86 million of adjusted EBITDA. RXO anticipates annualized cost synergies of at least US$25 million from the integration.

The transaction will be funded through a combination of equity and debt. This includes a US$300 million equity investment from MFN Partners and a US$250 million equity investment from Orbis Investments, two of RXO’s largest shareholders. The deal is backstopped by fully committed financing and is expected to be leverage-neutral.

RXO’s Board of Directors has unanimously approved the transaction, which remains subject to customary closing conditions and regulatory approvals. The acquisition is expected to close by the end of 2024.