XPO Logistics on track for 1-2 deals this year; 'big acquisition' possible
07 MAY 2018
XPO Logistics [NYSE:XPO], the Greenwich, Connecticut-based global logistics provider, expects to make at least one acquisition this year and it could be a sizeable one, CEO Bradley Jacobs said.
On the 1Q18 earnings call held 3 May, Citi analyst Chris Wetherbee asked for an update on XPO's M&A process.
"It's progressing well, and it's progressing as expected and as originally outlined last year when we returned to the M&A market," the CEO replied.
Jacobs noted that when XPO announced its return to the market last year, the company said it would take a methodical, disciplined approach, as it did from 2011 to 2015.
"We wanted to cast a wide net, speak to lots of potential acquisition targets, and then funnel it down to a smaller and smaller amount, and then end up selecting the one that's the most accretive and most valuable for our shareholders and our customers," the CEO said. "And we said the base case scenario is, we would have a big acquisition or two medium-sized acquisitions announced by the end of this year, and we're very much on track for that. That could be three weeks from now. That could be three months from now. That could be December. But the base case scenario is this year."
Regarding areas of geographical interest, CEO Jacobs said XPO continued to look at potential targets that operated in more than one country, and usually on more than one continent.
"So global companies, and the headquarters are generally in North America or Western Europe. And the types of companies are ones that are identical, or similar, or very adjacent to the service lines that we're actually offering right now," he said.
Later in the session, Deutsche Bank's Amit Mehrotra asked about deal parameters.
"There's no reason to do an acquisition unless it's extremely accretive. There's just no reason to," the CEO replied.
He added that "the vast majority of the ones that we're looking at are asset light, and have similar or less CapEx as a percentage of revenue as we do."
XPO operates in 32 countries and has European headquarters in Lyon, France. The company has two reporting segments: Transportation and Logistics.
The transportation segment generated revenue of USD 2.77bn for the quarter, a 16% increase from the same period in 2017. The logistics segment generated revenue of USD 1.45bn for the quarter, a 23.2% increase from the same period in 2017.
The Wall Street Journal reported in August 2017, citing CEO Jacobs, that XPO could spend USD 7bn or USD 8bn to acquire whole companies or parts of larger ones. XPO was also interested in smaller targets with EBITDA of USD 50m to USD 100m, the report said.
In late December 2017, ReCode reported that Home Depot [NYSE:HD] had discussed within its own walls the idea of acquiring XPO.
XPO was highly acquisitive in the first half of this decade. Morgan Stanley advised on its two largest acquisitions during that period, with JPMorgan also used for one of those deals. On the legal side, Wachtell, Lipton, Rosen & Katz; King & Spalding; and Akerman have been used multiple times in recent years, according to the Mergermarket M&A database.
XPO Logistics has a market capitalization of USD 12.6bn.
Relevant links (supplied by Perfect Information, an Acuris Company)
Form 8-K filed 2 May 2018
Form 10-K filed 12 February 2018
Investor presentation 7 February 2018