Pitney Bowes Inc. took a big leap into the U.S. parcel shipping market today by acquiring privately held Newgistics Inc., a provider of reverse and forward parcel shipping services, for about $475 million.
The transaction, which has been the subject of industry rumors for several months, will merge Pitney's formidable IT capabilities with Newgistics' physical distribution network, which processes 100 million parcels a year—more than half the volume moving through the U.S. Postal Service's fast-growing "Parcel Select" product, where large parcel consolidations managed by firms like Newgistics are inducted deep into the postal delivery infrastructure for final deliveries to residences.
Austin, Texas-based Newgistics has been known primarily as a provider of parcel return services, although it today generates more revenue from forward parcel deliveries than from returns, according to an industry source. Its network consists of nine operating centers and 50 transportation partners. Newgistics does not operate any transportation assets. It has about 500 customers.
Stamford, Conn.-based Pitney, which for nearly a century was the 800-pound gorilla in the mailing-equipment space, has evolved more into a technology provider in recent years, as more mail volumes have shifted to digital handling. Pitney Bowes has invested to grow its e-postage business and is today one of the larger e-commerce participants. Pitney's $395 million acquisition of New York-based Borderfree in May 2015 propelled it into the international cross-border business, considered the fastest-growing segment of the parcel industry.
"Shipping will drive the next phase of our transformation," Pitney President and CEO Marc B. Lautenbach said in a statement announcing the Newgistics deal. Lautenbach cited figures showing that global parcel volumes have increased 48 percent globally over the past two years and are expected to grow another 17 to 28 percent between 2017 and 2021.
"The cross-collaboration opportunities between Pitney Bowes and Newgistics are immense," said Rob Martinez, president and CEO of Shipware LLC, a parcel consultancy. Pitney will migrate Newgistics' service offerings onto its IT platforms, while Newgistics will introduce the suite of Pitney's IT portfolio across its customer base, Martinez said.
Pitney may also leverage Newgistics' infrastructure to expand its presence in the market for the pre-sortation of letters, parcels, and newsletters and magazines, the latter of which is best known in postal lingo as "flats," according to Gordon Glazer, who follows both companies for Shipware.