XPO buys truck broker Covered Logistics in $11 million cash and stock transaction

XPO Logistics, Inc., a nonasset-based third-party logistics provider with ambitious expansion plans, said late yesterday it acquired truck freight broker Covered Logistics & Transportation LLC, for $8 million in cash and $3 million in XPO stock.

Covered Logistics, with offices in Dallas and in Lake Forest, Ill., a Chicago suburb, was founded in 2005. Its co-founders, Tuck Jasper, Paul Jasper, and Patrick Gillihan, will continue to lead the operation, which is being rebranded as XPO Logistics. Covered Logistics works with 4,000 motor carriers and is strong in the manufacturing, postal, consumer, and energy sectors, XPO said in a statement yesterday.

The acquisition is the second that Greenwich, Conn.-based XPO has made this year and the sixth in the past 14 months. Earlier this month, it acquired East Coast Air Charter Inc., a Statesville, N.C.-based air cargo charter broker, in a $9.25 million all-cash deal. Bradley S. Jacobs, XPO's chairman and CEO, said the company plans to acquire companies that, in aggregate, generated $300 million in annual revenue in 2012. Jacobs told DC VELOCITY yesterday that by year's end XPO should have revenue of about $650 million to $750 million, a figure that includes the revenue brought in by acquired companies.

After the markets closed yesterday, XPO reported full-year operating revenue of $278.5 million, compared to $147.3 million in 2011. The company's gross margin, which subtracts the costs of purchased transportation, totaled $40.8 million, up from $29.8 million in 2011.

XPO reported a full-year operating loss of $27.9 million, compared with an operating profit in 2011 of $1.7 million. The company's sales, general, and administrative expenses increased by more than $40 million year-over-year as it incurred the upfront costs of adding facilities, staff, and technology, among other things. XPO, which operates out of 57 facilities in the U.S. and three in Canada, plans to add 400 employees in 2013, which will bring headcount to about 1,300, Jacobs said. Most of the workforce additions will be sales-related, he said.

Jacobs pointed to XPO's year-over-year gross margin improvements to demonstrate that, on a daily operating basis, the company is functioning well. "We are not hauling unprofitable freight," he said.

XPO operates in the truck brokerage, freight forwarding, and expedited transportation segments. But it focuses most of its attention on the highly fragmented, $50 billion a year truck brokerage market. Jacobs' goal is to control about 10 percent of the brokerage market, up from an estimated 1 percent today.