XPO Logistics plans to spin off its freight brokerage arm and divest its intermodal and European businesses as it refines its focus on trucking.
The Greenwich, Conn.-based company said Tuesday its board approved the spinoff of its transportation brokerage services division to become its own public company, along with the possible sales of its North American intermodal and European businesses. The moves, XPO said, would give it room to be a pure-play trucking company.
Investors seemed to like the news. Shares of XPO jumped nearly 11 percent in after-hours trading Tuesday, following the announcement, to $61.93. XPO had a recent market cap of $7.1 billion.
The announcements follow last year’s spinoff of warehousing and distribution services company GXO Logistics.
“We learned from the GXO spin that when you have a management team doing one thing, they’re more focused and fit for purpose to drive growth,” XPO chair and CEO Brad Jacobs told CNBC Tuesday, adding pure-play companies are easier for investors to understand.
Similarly, the trucking and brokerage businesses each have their own “distinct operating model,” Jacobs said in a statement Tuesday.
“We believe that by separating these businesses through a spin-off, we can significantly enhance value creation for our customers, employees and shareholders, as we did with our successful spin-off of GXO last year,” the CEO said.
GXO, with a market cap of $7.8 billion, closed up nearly 6 percent on Tuesday to $68.
GXO is building up its warehousing capabilities in its own right, with the company last month making an offer to buy Clipper Logistics for 965 million pounds ($1.3 billion). The deal would bring e-commerce logistics expertise and heavy hitters in the fashion space into GXO’s fold with Asos, PrettyLittleThing, Giorgio Armani and River Island among the companies Clipper counts in its customer base.
The decision post-spinoff would allow the trucking and brokerage businesses to focus solely on their priorities and “tailor strategic decision-making,” XPO said.
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The trucking business would come out of the spinoff as the third largest in North America, the company said, with 21,000 employees, about 12,000 drivers, 291 terminals and 25,000 accounts.
The trucking business closed last year with revenue of $4.1 billion and earnings before interest, taxes, depreciation and amortization of $904 million.
The brokerage business, which is expected to see its spinoff completed in the fourth quarter, had revenue of $4.8 billion last year with adjusted EBITDA of $305 million. The business, which offers services in last mile and freight forwarding, counts 172 locations and roughly 5,500 employees.
The brokerage business services about 10,000 customers with last mile logistics, forwarding and transportation management.
Meanwhile, XPO said it has an exclusivity agreement with a possible buyer for its $1.2 billion intermodal business in North America, which offers drayage and rail brokerage services.
The company said plans for the European business, which handles last mile and freight forwarding, are to either sell or list it in Europe. The European business closed last year with $3.1 billion in revenue.