“There is also a separate universe of investors who want to invest in an asset-light, technology-enabled truck broking platform that will be the spin-off,” he added.
The remaining trucking business will retain current management including Jacobs, ticker symbol XPO and headquarters in Greenwich, Connecticut. XPO will focus solely on LTL, where the company takes 33% of revenue.
LTL trucking, which allows multiple customers to ship goods in the same truck, has become increasingly in demand during the global supply chain disruption caused by the Covid pandemic as full truckload capacity becomes more expensive and difficult for companies to find.
“We have managed the LTL business very well. We have generated over $3 billion in net cash and have improved margin by 910 basis points since we bought the business. It will be more focused after the spin-off,” Jacobs said.
The truck broking business – which includes last-mile delivery, freight forwarding and managed transport – is expected to begin trading under a new name by the end of 2022. It will have a separate management team and be headquartered in Charlotte, North Carolina.
XPO also has an exclusive agreement with a potential buyer for its intermodal container shipping business. However, if this deal is not closed, XPO said the container shipping business will be included in the spin-off.
The company will divest its European business, which includes trucking, truck brokerage and other services through either a sale or listing on a European stock exchange.
Tuesday’s announcement is a departure from XPO’s growth strategy between 2011 and 2015, which included the 2015 acquisition of LTL truck maker Con-Way for $3 billion.
In March 2021, XPO announced that it would spin off its contract logistics business into a separate publicly traded company called GXO. These shares began trading again on August 2. Including a nice move higher in regular trading on Tuesday, GXO has gained nearly 17% since then compared to a roughly 4% decline in the S&P 500 over the same time period.
“We learned from GXO that when you have a management team that does one thing, they are more focused and fit for purpose of driving growth,” Jacobs said. “We have also learned that by creating a company that is an industry leader, it is easier for investors to understand and unlearn it.”
XPO is the third largest LTL carrier in the United States by revenue. Customers include Caterpillar and Tractor Supply Company. XPO’s North American LTL business recorded more than $4.1 billion in revenue in 2021, with 16% year-over-year growth.
The pricing of the shares and the number of new LTL shares existing XPO shareholders will receive are still being determined. XPO has retained Goldman Sachs, Morgan Stanley and BofA Securities to assist with the offering.
