XPO Logistics to buy Con-way Inc. in $3.0 billion transaction

XPO Logistics Inc. and Con-way Inc. announced after the markets closed today that they have entered into a definitive agreement for XPO Logistics to acquire Con-way. The transaction will make XPO the second-largest less-than-truckload (LTL) provider in North America and will expand the company's contract logistics offerings in North America and Europe. The acquisition follows several other, similarly large deals, including XPO's acquisition of third-party logistics provider (3PL) Norbert Dentressangle.* Over the past two years XPO Chairman and CEO Bradley S. Jacobs has acquired a number of other brokers and 3PLs, including Landstar Systems' supply chain operations and last-mile specialist 3PD.

Ann Arbor, Mich.-based Con-way is a Fortune 500 company with a transportation and logistics network of 582 locations and approximately 30,000 employees serving more than 36,000 customers. Con-way is the second-largest provider of less-than-truckload transportation in North America. It operates four additional lines of business: contract logistics; managed transportation and truck brokerage through its subsidiary, Menlo Logistics; and full truckload transportation. The company had $5.8 billion of revenue for the full year 2014.

XPO said it intends to increase Con-way's annual operating profit by $170 million to $210 million over the next two years through synergies and operational improvements. The company also said it will remain asset-light, with asset-based operations expected to account for about a third of sales. All of the acquired operations—Con-way Freight, Menlo Logistics, Con-way Truckload, and Con-way Multimodal—will be rebranded as XPO Logistics.

Under the terms of the agreement, XPO will launch a tender offer for all of Con-way's outstanding shares at a cash price of $47.60 per share. The total transaction value is approximately $3.0 billion, including $290 million of net debt. Following the tender offer, if successful, Con-way will merge with a subsidiary of XPO and become a wholly owned subsidiary of XPO, the companies said in a statement. Jacobs will retain his current positions and will lead the combined company. Douglas Stotlar, Con-way's president and chief executive officer, will serve in a "nonexecutive advisory capacity during a transition period," according to the press release.

The transaction is expected to close in October, following the successful completion of the tender offer and subject to the satisfaction of customary conditions, including regulatory approvals. The boards of directors of XPO and Con-way have unanimously approved the transaction, the companies said.

"Our opportunistic acquisition of Con-way will make XPO the second-largest provider of less-than-truckload transportation in North America, a $35 billion market. LTL is a noncommoditized, high-value-add business that's used by nearly all of our customers," Jacobs said. "Con-way is a premier platform that we will run with a fresh set of eyes as part of our broader offering. Importantly, we'll gain strategic ownership of assets that will benefit our company and our customers during periods of tight capacity."

Jacobs also referred to Con-way subsidiary Menlo Logistics as "another crown jewel" in the transaction. Menlo serves contract logistics customers in verticals such as high tech, healthcare, and retail, which complement the verticals XPO currently serves, including aerospace, retail, telecom, agriculture, chemicals, and food and beverage, Jacobs said in the statement. The combination also will strengthen XPO's position in the highly desirable e-commerce sector, he added.

The Con-way transaction will nearly double XPO's pro-forma full year EBITDA to approximately $1.1 billion and increase revenue to $15 billion, Jacobs said. The combination will expand XPO's global contract logistics platform by 22 million square feet, to a total of 151 million square feet, and will add 160 facilities. In North America, XPO will have approximately 11,000 owned tractors and 33,000 owned trailers, 6,000 trucks contracted through independent owner-operators, and access to more than 38,000 independent carriers, the company said.

XPO's rapidly expanding footprint includes truck brokerage and transportation, last-mile logistics, intermodal, contract logistics, ground and air expedited transportation, drayage, global forwarding, and managed transportation. The company says it serves more than 30,000 customers in 27 countries.

Editor's Note: A previous version of this article incorrectly stated that XPO had acquired Coyote Logistics. Coyote Logistics was acquired by UPS.