XPO Logistics plans to spin off its freight brokerage arm and divest its intercontinental and European freight businesses, focusing on trucking.
The Greenwich, Conn.-based company said Tuesday its board of directors has approved the conversion of its transportation brokerage division into a standalone public company, along with potential sales of its intermodal transportation businesses in North America and Europe. XBO said the moves would give it room to become a purely transportation company.
Investors seemed to like the news. XPO shares jumped about 11% in after-hours trading Tuesday after the announcement, to $61.93. XPO’s market cap recently stood at $7.1 billion.
These announcements come on the heels of GXO Logistics, a warehousing and distribution services company, announcing the establishment of a subsidiary last year.
“We learned from the GXO campaign that when you have a management team that does one thing, they are more focused and fit for purpose in driving growth,” XPO Chairman and CEO Brad Jacobs told CNBC on Tuesday, adding that companies with pure activism are easier for investors to understand.
Similarly, carriers and brokerages have their own “distinctive operating model,” Jacobs said in a statement Tuesday.
“We believe that by separating these businesses through a subsidiary, we can significantly enhance value creation for our customers, employees and shareholders, as we did with the successful spin-off of GXO last year,” the CEO said.
GXO, which has a market cap of $7.8 billion, closed up about 6 percent on Tuesday at $68.
GXO is ramping up its warehousing capabilities, having last month made an offer to buy Clipper Logistics for £965 million ($1.3 billion). The deal would bring e-commerce logistics expertise and high-end fashion brands to GXO, with Asos, PrettyLittleThing, Giorgio Armani and River Island among the companies Clipper counts among its client base.
XPO said the decision following the split would allow carriers and brokerages to focus solely on their priorities and “design the strategic decision-making process.”
The company said its trucking business will emerge from the subsidiary as the third-largest in North America, with 21,000 employees, about 12,000 drivers, 291 terminals and 25,000 accounts.
The trucking business closed last year with revenue of $4.1 billion and earnings before interest, taxes, depreciation and amortization of $904 million.
The brokerage business, which is expected to close in the fourth quarter, generated $4.8 billion in revenue last year with adjusted earnings before interest, taxes, depreciation and amortization of $305 million. The company, which offers delivery and shipping services, has 172 locations and about 5,500 employees.
The brokerage business serves approximately 10,000 clients through last-mile logistics, freight management and transportation.
Meanwhile, XPO said it has entered into an exclusive agreement with a potential buyer for its $1.2 billion North American intermodal transportation business, which offers ground transportation and rail brokerage services.
The company said its plans for its European business, which deals with delivery and shipping services, are to sell it or list it in Europe. Its European business closed last year with revenue of $3.1 billion.
