XPO shares soar as rumor hits of possible Home Depot buyout

Shares of transport and logistics provider XPO Logistics Inc. soared to an all-time high today after a report from a respected technology-industry website said retail giant Home Depot Inc. had held internal discussions about acquiring XPO to keep it away from rival retailer Amazon.com Inc.

The report, from Recode, cited a person familiar with the thinking inside Atlanta-based Home Depot. The person, who was not identified, also said Home Depot believes Seattle-based Amazon would eventually make a bid for Greenwich, Conn.-based XPO. A possible Amazon-XPO tie-up has been floating around the industry rumor mill for years, especially after XPO acquired last-mile delivery specialist 3PD in 2013 to get a foothold in e-commerce.

Amazon has spent several years assembling its own transport infrastructure network to better manage its enormous flow of volumes and to attract more merchants into its fast-growing fulfillment services. In theory, it would covet a company like XPO, which has built a powerful end-to-end fulfillment and delivery network, in large part through the 2015 acquisition of truckload and logistics company Con-way Inc. Such a purchase would allow Amazon to avoid having to create an operation of similar scale from the ground up. XPO said in September that it plans to nearly double its current last-mile delivery network to 85 service hubs by the end of next year.

Amazon also has access to large amounts of capital to pursue an acquisition. Its most recent acquisition was high-end retailer Whole Foods Market, which Amazon bought in June for $13.7 billion.

XPO declined comment, while Home Depot was unavailable to comment.

Shares of XPO jumped $11.50 a share today to close at $90.02, an all-time closing high. The stock had hit an all-time intra-day high of $90.25 a share. Home Depot shares gained fractionally, while Amazon shares dropped about $6.40 a share. The spike in XPO shares would put the company's equity market capitalization at just under $11 billion.

Benjamin Gordon, founder of BG Strategic Advisors, a Palm Beach, Fla.-based transport and logistics mergers and acquisitions (M&A) firm, said the rumor of a Home Depot-XPO affiliation is credible because every major retailer is looking at different strategies to compete with Amazon and to get ahead of the omnichannel fulfillment trend spawned by e-commerce's explosive growth. Gordon said he recently met with retailer Best Buy Inc. to discuss how M&A might fit into Best Buy's strategic vision.

Gordon's firm was an investor in Grand Junction, an IT firm specializing in supporting last-mile delivery services, which was bought by Minneapolis-based Target Corp. earlier this year. Target followed that purchase up in mid-December with the acquisition of Shipt Inc., a Birmingham, Ala.-based company specializing in same-day delivery services.

"Home Depot, like every retailer, is trying to figure out a competitive strategy," Gordon said in an email. "In all cases, it is vital to address the question of how to ensure a successful last-mile solution." Gordon said he was unaware of the Home Depot-XPO rumors until this afternoon.

Home Depot and XPO have been doing business for a number of years. Home Depot was a key 3PD customer, and the relationship continued after 3PD was bought by XPO. At the same time, Amazon has reached out to XPO for potential partnerships. Amazon, which said in June it would enter the furniture business, is reportedly considering XPO as its primary delivery provider.

Recode is hardly a scandal sheet operating on the fringes of online journalism. Founded in January 2014 by Walt Mossberg and Kara Swisher, former **italic{Wall Street Journal} reporters and two of the nation's most respected IT journalists, Recode prides itself on obtaining credible information from sources at high-level positions, according to a person familiar with its operation. The website does not publish stories just for shock value, the person said.

Separately, 34 XPO drivers in Albany, N.Y., today filed for Teamster union representation with Local 294, the Teamsters said. The 34 drivers are based at a facility that once belonged to Con-way Freight, Con-way's former (LTL) unit.

The Teamsters have organized XPO workers in Laredo, Texas; Vernon, Calif.; Miami; Aurora, Ill.; King of Prussia, Pa.; and Trenton, N.J.