UPS (NYSE: UPS) Acquires Coyote Logistics for $1.8 Billion

This move will add more service offerings to the portfolio of UPS in the rapidly growing freight brokerage business during a time when the giant in the delivery field has been trying to maintain profitability and lower costs after two straight tough holiday seasons and a movement amongst shippers toward less expensive and slower methods of delivery.

“The brokered full-truckload freight segment is a high growth market and we expect it will continue to outpace other transportation segments”, UPS Chief Executive David Abney said. UPS has said it is doubling its investment there to almost $2 billion over five years, while XPO Logistics Inc. earlier this year said it was purchasing French contract-logistics firm Norbert Dentressangle SA in a deal valued at $3.53 billion. Coyote, whose clients range from food and drink companies to retailers and paper and industrial firms, should be able to help fill some of those empty trailers with customers’ goods in the future, Gaut said. “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”.

UPS is hoping to close the transaction within this month and it will use the combination of debt and cash to finance the deal. The deal is also expected to be accretive to UPS earnings in 2016, according to the press release.

“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.

The Access America founders said last year that they planned to retain an interest in the merged company but wouldn’t exercise any management in Coyote. In April, FedEx Corp. agreed to buy Dutch parcel-delivery company TNT Express NV for $4.8 billion. A similar attempt to acquire TNT by UPS collapsed in 2013 when it failed to satisfy European regulators. UPS Supply Chain Solutions ranked fourth with $5.76 billion in revenue, though it had largely steered clear of freight brokering before Friday’s deal.

Coyote possesses significant industry knowledge, intellectual property, employee talent, and has a strong company culture.