XPO Logistics (NYSE: XPO), an eager buyer of fellow logistics operators, has delivered news of a fresh acquisition. On Wednesday, it announced it signed a definitive agreement to purchase trucking company Con-way (NYSE: CNW). The all-cash deal is worth around $3 billion, including $290 million in net debt assumption.
XPO Logistics will launch a formal tender offer for all Con-way outstanding stock at a price of $47.60 per share. According to the acquirer, this represents a nearly 32% premium to the closing stock price the day before the deal was announced. In the press release heralding the purchase, XPO Logistics said that owning Con-way would make it America's second largest provider of less-than-truckload transportation. As the name implies, this segment of the logistics market is based on loads that do not require a full truck trailer.
The Con-way buyout is the latest in a string of asset purchases for XPO Logistics. This past June, the company inked a $3.5 billion deal to acquire France-based road shipper Norbert Dentressangle. Closer to home, it bought American last mile delivery company UX Specialized Logistics for $59 million in February.
According to XPO Logistics, the pricey Con-way buy will be well worth it -- the company believes it will boost overall revenue to around $15 billion annually. That's substantially higher than the $2.4 billion it posted for fiscal 2014.
XPO Logistics has grown rapidly thanks to such opportunistic buys. This one will vault it nearly to the top of its industry and as such has to be considered advantageous. Although Con-way is not a bargain, its owner-to-be says it has secured $2 billion in financing for the buyout to compliment a $1.2 billion cash position and an available $415 million revolving credit facility. Loans are still relatively cheap these days, so we can assume the costs of those credit arrangements are reasonable.
XPO Logistics expects a fairly quick resolution to the takeover bid -- it assumes it will close sometime in October.
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Eric Volkman has no position in any stocks mentioned.