Ambitious Canadian group says acquisition of integrator’s $3bn-turnover road freight business ‘will vault TFI International to one of the largest North American LTL carriers’, where it sees ‘compelling opportunities to improve efficiency and productivity’.
Acquisitive Canadian transport and logistics group TFI International has agreed to buy UPS’s North American road freight business UPS Freight (UPSF) for US$800 million, creating one of the largest less-than-truckload (LTL) operators in North America.
The group, which has made 88 acquisitions in North America in the last 13 years, said the definitive agreement to acquire the LTL and dedicated truckload (TL) divisions of United Parcel Service, was a ‘win-win’, “allowing TFI to continue our strategic expansion across the US and aligning with UPS’ ‘Better not Bigger’ strategic positioning”. The two will continue to work together as part of a five-year capacity deal.
As well as seeing opportunities from an expanded network, TFI said it saw “compelling opportunities to improve efficiency and productivity” of the acquired business. It said around 90% of the acquired business will operate independently within TFI International’s LTL business segment under its new name, TForce Freight, while the acquired dedicated TL assets will join TFI’s TL business segment.
The transaction has been unanimously approved by the boards of both TFI and UPS and is expected to close in the second quarter of 2021 subject to customary closing conditions including regulatory approvals.
Alain Bédard, chairman, president and CEO of TFI International, commented: “We are pleased to announce this highly strategic transaction that will strengthen our service offerings to customers as well as our ongoing relationship with UPS. Our strategy of operating independent business units with a high degree of accountability is well-suited for building on UPS Freight’s strengths and improving margins over time.
“TForce Freight will continue to serve UPS’ ongoing LTL distribution needs, and UPS will continue to provide freight volumes and other services to TForce Freight after the transaction for a base term of five years. We also look forward to offering expanded strategic network opportunities to UPS in Canada.”
Mr Bedard continued: “We’re excited by this very attractive opportunity to extend our longstanding record of successful growth through acquisition, which will vault TFI International to one of the largest North American LTL carriers. The assets acquired include a network of 197 facilities – 147 of which are owned – and combined with TFI’s Canadian LTL operations, will create what we believe to be North America’s single most comprehensive LTL network, especially as we continue our expansion into Mexico leveraging our existing LTL brokerage operations there.
“In particular, we see compelling opportunities to improve TForce Freight’s efficiency and productivity and apply our proven business model to drive long-term value creation. We look forward to the new TForce Freight thriving in the years ahead under the TFI International umbrella.
“Given our soon to be expanded, comprehensive and highly efficient network, we’re eager to work with our new colleagues to optimize performance and are very pleased to welcome the entire UPS Freight family to TFI International.”
Headquartered in Richmond, VA, UPS Freight has an operating history of over 85 years. One of the largest LTL carriers in the US, it offers regional and long-haul solutions and an on-time delivery guarantee for all LTL shipments.
UPS Freight generated approximately US$3 billion in revenue in 2020 and was approximately breakeven from an operating income perspective. TFI said the transaction was expected to improve its earnings per share (EPS) performance in 2021.
“Going forward, TFI International expects to realise significant near- and long-term opportunities to improve TForce Freight’s operating margin through separate management of LTL and dedicated TL businesses, operating efficiencies, and providing superior products to our customers,” the company noted. It said TFI intends to “make targeted investments” in the LTL fleet in the first 12 months following the transaction, “lowering maintenance costs, improving both efficiency and safety, and enhancing customer service and driver satisfaction”.
UPS Chief Executive Officer Carol Tomé said the decision to sell UPS Freight was reached following a thorough evaluation of the UPS portfolio, also noting that it aligned with the company’s ‘better not bigger’ strategic positioning. She confirmed that UPS and TFI International will also enter into an agreement for UPS Freight to continue to utilise UPS’ domestic package network to fulfil shipments, for a period of five years.
“We’re excited about the future and the opportunities this creates for both UPS and UPS Freight as part of TFI International,” said Ms Tomé. “The agreement allows UPS to be even more laser-focused on the core parts of our business that drive the greatest value for our customers.”
TFI International is a major North American transport and logistics group, operating Logistics, Truckload, Less-Than-Truckload, and Package and Courier services across the United States, Canada and Mexico through its subsidiaries. It boasts an integrated network that “is driven by the power of over 80 operating companies and more than 16,700 employees working alongside independent contractors”.
The group said it “creates value for shareholders by identifying strategic acquisitions and managing a growing network of wholly-owned operating subsidiaries. Under the TFI International umbrella, companies benefit from financial and operational resources to build their businesses and increase their efficiency.”
The group said it has made 88 acquisitions in the US, Canada and Mexico since 2008, noting: “We strive to consistently identify strategic acquisitions to grow our network of wholly-owned operating companies and increase shareholder returns. Each acquisition is chosen for its strong management team, cultural fit, and earnings potential. We ensure our companies get the financial and operational resources to grow their businesses.”
Source: lloyd´s
