US-based company, XPO Logistics, has approved a plan to pursue a spinoff of 100 per cent of its logistics segment as a separate publicly traded company.
XPO intends to structure the spinoff as a transaction that is tax-free to XPO shareholders and would result in XPO shareholders owning stock in both companies.
After a thorough examination of all strategic alternatives, the XPO board currently believes that the optimal path to unlock aggregate equity value is to create two independent companies that are each well-equipped to capitalise on secular growth trends in their sectors. If completed, the spinoff will result in separate businesses with clearly delineated service offerings: XPORemainCo, a global provider of less-than-truckload (LTL) and truck brokerage transportation services; and NewCo, the second largest contract logistics provider in the world. Both 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,” said XPO Logistics Chairman and CEO, Brad Jacobs.
“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,” he said.
If the spinoff is completed as expected: Jacobs will continue to serve as Chairman and CEO of XPORemainCo, and will become chairman of the NewCo board; 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.
The transaction is currently expected to be completed in the second half of 2021, subject to various conditions, including the effectiveness of a Form 10 registration statement, receipt of a tax opinion from counsel, the refinancing of XPO’s debt on terms satisfactory to the XPO board of directors, and final approval by the XPO board of directors. There can be no assurance that a separation transaction will occur or, if one does occur, of its terms or timing.
The XPO Board of Directors claim that the creation of two pure-play businesses with distinct service offerings will provide significant benefits to both companies and their stakeholders, and that a lower debt profile with enhanced earnings potential will make it easier to achieve each company’s target of an investment-grade credit rating.