UPS today announced the $1.8 billion acquisition of US truckload freight brokerage company Coyote Logistics to expand its ground transportation activities significantly and to benefit from the fast-growing transportation management market.
The acquisition, which was widely speculated about in US media last week, is UPS’ biggest deal for many years and will boost its Supply Chain & Freight division with additional revenues, profits and customers. Coyote Logistics, with revenues of $2.1 billion in 2014, will become a UPS subsidiary under its existing management.
Outlining the key arrangements, UPS said it has entered into a definitive purchase agreement to acquire Coyote Logistics, a technology-driven, non-asset based truckload freight brokerage company, for $1.8 billion from Warburg Pincus.
Closing is expected within 30 days, subject to customary conditions and regulatory approvals. The transaction will be financed with available cash resources and through existing and new debt arrangements, and the acquisition is expected to be accretive to UPS earnings in 2016.
UPS CEO David Abney said: “The brokered full-truckload freight segment is a high growth market and we expect it will continue to outpace other transportation segments. This high quality acquisition significantly increases UPS full-truckload scale and we are uniquely positioned to take advantage of exciting new revenue growth and synergy opportunities.
“In addition to the core profitability of Coyote, UPS is well positioned to realize a run-rate of $100 to $150 million of annual operating synergies, from backhaul utilization, purchased transportation and cross-selling opportunities,” he added.
“UPS is enthusiastic about this acquisition on many levels because there are opportunities for growth, synergistic efficiencies and transfer of best practices and systems across all of our operating segments,” he underlined.
Jeff Silver, Coyote CEO, commented: “The Coyote management team is very excited to become a part of UPS and continue to grow, now with UPS’s support. Our great people, leading technology and flexible organization will enable us to scale quickly to take full advantage of the added customers, lanes and capacity within UPS. It’s a great day for Coyote employees, our customers and our contracted carriers.”
Coyote arranges customers’ freight shipments on available trucking capacity contracted to members of its large carrier network, numbering more than 35,000 trucking companies. Coyote has experienced very rapid revenue growth since its 2006 launch and has built extensive relationships with a broad customer base. The company enjoys strong market positions among food and beverage, and consumer goods customers, as well as paper and packaging, industrial and retail segments. Following the acquisition and integration of Access America Transport to its network last year, Coyote added industry leading strength in flatbed serviced segments such as heavy equipment and construction.
UPS pointed out that during the peak holiday shipping season it often supplements its fleet with contract transportation providers to meet customer demand. Coyote has played a growing role in supporting UPS peak operations over the past few years and the company expects to leverage Coyote’s carrier network even further for this purpose in the future.
UPS has also identified revenue growth and fleet efficiency synergy opportunities by hauling shipments arranged by Coyote using existing UPS backhaul capacity within its tractor/trailer fleet.
“Through the Coyote network, UPS will provide our combined customer base with an even more seamless supply chain solutions portfolio from multi-modal freight shipments to small-package delivery,” said Alan Gershenhorn, UPS executive vice president and chief commercial officer.
“We will now also have the technology to help our customers improve the utilization of their fleets as part of an extended network of carriers,” Gershenhorn said. “We see opportunities for greater customer and UPS fleet asset utilization that will deepen our partnerships with customers.”
Coyote uses a suite of proprietary information technologies that provides market-leading transportation management applications. The company also offers several software applications that customers and transportation providers can easily integrate. In addition, Coyote possesses significant industry knowledge, intellectual property, employee talent, and has a strong company culture, UPS noted.
For these reasons, Coyote will operate as a subsidiary of UPS, under Jeff Silver’s leadership, with careful attention given to supporting the unique characteristics that have enabled its success to date, the Atlanta-based company emphasised.
BofA Merrill Lynch and UBS are serving as financial advisors to UPS. Goldman Sachs & Co. acted as lead financial advisor to Coyote. Credit Suisse, Morgan Stanley and Wells Fargo Securities also acted as financial advisors to Coyote.
