XPO Logistics Inc. and Con-way Inc. 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 global contract logistics platform.
All of the acquired operations — Con-way Freight, Menlo Logistics, Con-way Truckload and Con-way Multimodal — will be rebranded as XPO Logistics. XPO intends to raise its year-end 2015 target run rates for revenue and EBITDA, and issue new long-term targets, upon completion of the acquisition.
XPO Logistics Inc. is a Top Ten global provider of cutting-edge supply chain solutions to the most successful companies in the world. XPO’s corporate headquarters is in Greenwich, Conn., and its European headquarters is in Lyon, France.
The company provides high-value-add services for truck brokerage and transportation, last mile logistics, intermodal, contract logistics, ground and air expedite, drayage, global forwarding and managed transportation. XPO serves more than 30,000 customers with a highly integrated network of more than 54,000 employees and 887 locations in 27 countries.
Headquartered in Ann Arbor, Mich., Con-way is a Fortune 500 company with a transportation and logistics network of 582 locations and 30,000 employees serving more than 36,000 customers. For the full year 2015, consensus analysts’ estimates for Con-way are $5.7 billion of revenue and $528 million of adjusted EBITDA. The transaction is expected to be substantially accretive to XPO’s earnings in the first 12 months.
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. Following the tender offer, if successful, Con-way will merge with a subsidiary of XPO, becoming a wholly owned subsidiary of XPO, and all remaining outstanding shares of Con-way will receive the same consideration paid to stockholders who participated in the tender offer.
The total transaction value is approximately $3.0 billion, including $290 million of net debt. The transaction value represents a multiple of approximately 5.7 times Con-way’s 2015 consensus EBITDA of $528 million. The per-share cash price represents a premium of approximately 31.6 percent compared to the closing price of Con-way common stock on Sept. 8, 2015, and a premium of 22.9 percent compared to the average closing price over the trailing 90 trading days as of Sept. 8, 2015.
Bradley Jacobs, chairman and chief executive of XPO Logistics, will retain these positions and lead the combined company. Douglas Stotlar, Con-way’s president and chief executive officer, will serve in a non-executive advisory capacity during a transition period.
The transaction is not conditioned on financing. XPO has received committed financing from Morgan Stanley in the aggregate amount of $2.0 billion. The company has approximately $1.2 billion in cash and an undrawn $415 million ABL revolver, and Con-way has approximately $424 million of cash. XPO expects to substantially increase its ABL capacity based on the addition of receivables from the acquisitions of Norbert Dentressangle and Con-way.
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.
Bradley Jacobs, chairman and chief executive officer of XPO Logistics, 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 non-commoditized, high-value-add business that’s used by nearly all of our customers. 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.
Douglas Stotlar, president and chief executive officer of Con-way, said, “This landmark transaction provides immediate cash value for our shareholders and reflects the outstanding contributions of our employees over our 86-year history. The combination will mean more services for our customers, more miles for our drivers, and more career opportunities for our employees as part of XPO’s global organization. We look forward to working with the XPO team to complete the transaction and ensure a smooth transition.”