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UPS Selling Freight Unit in $800 Million Deal

UPS has entered into a definitive agreement to sell UPS Freight to TFI International Inc. for $800 million, subject to working capital and other adjustments.

UPS said the decision to sell UPS Freight was reached following a thorough evaluation of the company’s portfolio and aligns with its “better not bigger” strategic positioning.

“We’re excited about the future and the opportunities this creates for both UPS and UPS Freight as part of TFI International Inc.,” UPS CEO Carol Tomé said. “The agreement allows UPS to be even more laser-focused on the core parts of our business that drive the greatest value for our customers.”

UPS and TFI International will also enter into an agreement for UPS Freight to continue to utilize UPS’ domestic package network to fulfill shipments for a period of five years.  A commercial agreement will allow UPS customers to continue using UPS Ground with freight pricing and the company said there will be no operational impact to UPS Small Package.

UPS Freight offers service across the U.S., to and from Canada, as well as Puerto Rico, the U.S. Virgin Islands and Guam. The company said UPS Freight employees will go with the business to TFI.

“Our strategy of operating independent business units with a high degree of accountability is well-suited for building on UPS Freight’s strengths and improving margins over time,” Alain Bédard, chairman, president and CEO of TFI International, said.

Bédard said the company will operate as TForce Freight and will continue to serve UPS’ ongoing LTL distribution needs.

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“We also look forward to offering expanded strategic network opportunities to UPS in Canada,” he said. “The assets acquired…combined with TFI’s Canadian LTL operations will create what we believe to be North America’s single most comprehensive LTL network, especially as we continue our expansion into Mexico leveraging our existing LTL brokerage operations there.”

The transaction, which is subject to customary closing conditions and regulatory approvals, is expected to close during the second quarter of 2021. UPS expects to recognize a non-cash, pre-tax impairment charge of approximately $500 million on its statement of consolidated income for the year ended Dec. 31, 2020. Revenue for the year was an estimated $3.15 billion on an estimated operating loss of $463 million.

With an operating history of over 85 years, UPS Freight is one of the largest LTL carriers in the U.S., offering a full range of regional and long-haul solutions and an on-time delivery guarantee for all LTL shipments and is headquartered in Richmond, Va.

UPS said the deal enables UPS to pay down long-term debt and further strengthen its balance sheet. It is expected to improve overall company operating margin and return on invested capital by roughly 20 basis points and eliminates future capital investments required to maintain and improve UPS Freight’s market position.

Goldman Sachs & Co. LLC is serving as financial advisor, and King & Spalding LLP is serving as legal advisor to UPS.