XPO finds a willing buyer for its $710 million intermodal unit

Third party logistics conglomerate XPO Logistics is continuing to shed layers, announcing today that it has sold off its North American intermodal business as planned, through a $710 million deal with STG Logistics Inc. 

The move comes just months after it spun off its contract warehousing arm as a standalone company now called GXO Logistics. And earlier in March, Greenwich, Connecticut-based XPO said it would slim down even further by separating its tech-enabled brokered transportation services from its less-than-truckload (LTL) business in North America, then selling off its European business and North American intermodal operation.

XPO has now delivered on a major segment of that promise, saying the divestiture advances its strategic plan to create two pure-play, publicly traded companies through a spin-off later this year. “This divestiture simplifies our business model and moves our capital structure closer to investment-grade — two priorities in our strategic plan to unlock significantly more value for our stakeholders,” Brad Jacobs, chairman and chief executive officer of XPO Logistics, said in a release. “We’ve completed a key step in preparing for our planned spin-off, when we’ll separate XPO into two publicly traded leaders in less-than-truckload transportation and tech-enabled brokered transportation services.”

For the sale price of $710 million, Chicago-based STG gains an intermodal unit that generated $1.2 billion of revenue in 2021. Those operations provide rail brokerage and drayage services and will transfer some 700 employees in 48 locations when the deal is done. Originally formed through XPO's purchase of Pacer in 2014 and Bridge Terminal Transport in 2015, the unit is North America's third largest provider of containerized transportation services, including 11,000 containers, 2,200 tractors, and 5,200 chassis.

Although the move was not a surprise, analysts said XPO was able fetch a good price for the transaction, according to an investors note from Bascome Majors, a stock analyst with Susquehanna International Group LLP (SIG). “XPO's intermodal sale was expected on the back of press leaks dating back to 2021 and the spinoff announcement a few weeks ago. Encouragingly, XPO management got the deal done at terms moderately more favorable than we'd anticipated,” Majors said.

STG said the acquisition was worth the price in order to expand its position in containerized logistics. “The combined business, which will go to market as STG Logistics, will stand as North America's leading provider of seamless, fully integrated, port-to-door containerized logistics services including drayage, transloading, warehousing, fulfillment, rail transportation, and associated final mile distribution,” the company said in a release.

STG raised the funds for the purchase from its private equity parent company, Wind Point Partners, in collaboration with new funding from Oaktree Capital Management L.P., including Oaktree's Transportation Infrastructure Investing and Global Opportunities Group.

"We are combining STG's leading position in facility-based container logistics with XPO Intermodal's leading position in container transport, creating a platform with unparalleled capabilities,” STG CEO Paul Svindland said in a release. “Once combined, the STG network will be able to handle a container from the instant it's ready at a port or customer facility to the moment each individual shipment arrives at its final destination, all the while providing customers full visibility and a single source of accountability."

Big news! STG has acquired the #intermodal division of @XPOLogistics. Read about it on our blog. https://t.co/0BZQPaFrms #MergersandAquisitions #supplychain pic.twitter.com/CQMmA8CXgg

— STG Logistics (@stglogistics) March 25, 2022

Today, we announced the sale of our North American intermodal business, a key step in advancing our strategic plan to create two pure-play industry powerhouses. Read more in our latest press release: https://t.co/6Uy8ewlWPI

— XPO Logistics, Inc. (@XPOLogistics) March 25, 2022