XPO Logistics: Why The Company Is Spinning Off Logistics Operations

By Amit Chowdhry ● December 14, 2020
  • XPO Logistics (NYSE:XPO) saw an increase of 13.66% in its stock price over the past month as it went from $106.34 to $120.87. This is why.

One of the biggest reasons why the stock price of XPO Logistics (NYSE:XPO) jumped in the past month is due to an announcement from the company that it will be splitting its operations in half. Specifically, the company announced it was going to spin off its contract logistics operations — which includes 200 million sq. ft. of warehouse space in 27 countries around the world — from the transportation operations. The transportation operations consist of the company’s LTL business, freight brokerage, and last-mile e-commerce business.

Back in January, XPO had announced it was going through strategic reviews of its businesses — which included spinning off some of its operations. Around that time, XPO’s CEO Brad Jacobs revealed that the company’s stock price was trading at well below the sum of its partners and at a major discount to its pure-play peers.

XPO is intending to structure the spin-off as a transaction that is tax-free to XPO shareholders and would lead to XPO shareholders owning the stock in both companies. If the spin-off is completed, the spin-off will result in separate businesses with clearly delineated service offerings: XPORemainCo (a global provider of LTL and truck brokerage transportation services) and NewCo (the second-largest contract logistics provider in the world). Both of the companies are expected to trade on the New York Stock Exchange.

“By uncoupling our transportation and logistics segments, we intend to create two high-performing, pure-play companies to serve the best interests of all our stakeholders. Both businesses will have greater flexibility to tailor strategic decision-making and capital allocations to their end-markets, with the benefit of strong positioning as customer-focused innovators. We currently believe that this spin-off is the most effective way to unlock significant value for our customers, employees, and shareholders,” said Brad Jacobs, chairman and chief executive officer of XPO Logistics in a statement recently.

Jacobs is going to continue to serve as chairman and chief executive officer of XPORemainCo and will become chairman of the NewCo board. And Troy Cooper will continue to serve as XPORemainCo’s president. And the executives currently leading XPO’s global logistics segment will continue to serve in senior positions with NewCo.

In an interview with CNBC’s Jim Cramer, Jacobs pointed out that the logistics business is in the middle of a “massive e-commerce boom.” 

“We have the largest outsourced e-comm fulfillment platform in all of Europe, we’re very big in omnichannel, we’re huge in reverse logistics, and we have a big presence in cold chain,” said Jacobs via CNBC. “So, all of the hottest parts of supply chain powered by this e-comm boom, we’re right in the middle of that.”

Disclaimer: This article is purely for informational purposes and is not a recommendation to buy the stock mentioned in this article.