UPS could be poised for major expansion in the supply chain logistics business through a $1.8 billion acquisition of US-based Coyote Logistics, according to widespread media reports.
UPS, which releases Q2 results next Tuesday (July 28), is in talks to buy the privately-owned logistics company for some $1.8 billion and a deal could be sealed this month, news agency Bloomberg reported, citing two unidentified people with knowledge of the matter. However, no agreement has yet been reached and discussions could still fail, it said.
According to Reuters, Coyote Logistics is backed by New York-based private equity firm Warburg Pincus, which could opt for an IPO instead of a sale as a way to exit from its investment in the company. All the companies involved declined to comment to the news agencies.
UPS has made a series of minor acquisitions in the last two years, including European healthcare logistics firms, but this would be by far its largest acquisition since the failed bid to take over TNT.
Coyote Logistics, founded in 2006, is a large freight transportation and logistics services provider in the USA with some 12,000 customers. The firm’s 3PL business model offers full truckload, LTL and intermodal transportation through a large network of partner carriers, as well as transport management services. In 2014 it merged with Access America Transport, giving the combined company annual revenues of some $2 billion, 17 locations with 1,750 employees, and some 40,000 contracted carriers.
If UPS does acquire Coyote, it would give the parcels company’s Supply Chain & Freight division a major boost in terms of revenues and customer base. UPS would gain an established 3PL business, enabling it to steer more volumes towards its own network (especially UPS Freight) while diversifying into the transport management business in the expanding supply chain management outsourcing sector.
In 2014, the UPS Supply Chain & Freight division had revenues of $9.4 billion, with $5.7 billion coming from Forwarding & Logistics and $3 billion from North American trucking business UPS Freight, and made an adjusted operating profit of $718 million.
An acquisition would also be the latest in a series of major M&A deals in the international freight transport sector in recent months. Rival FedEx bought US supply chain firm Genco for $1.4 billion and plans to buy TNT for €4.4 billion, while XPO Logistics acquired France’s Norbert Dentressangle for $3.5 billion and Japan Post took over Australia’s Toll Group for $5.1 billion.
