“UPS aspires to be the world's leading package delivery and logistics partner, and our decision to sell our Coyote Logistics business will allow us to better focus on our core business,” UPS CEO Carol Tomé said in a statement.
UPS acquired Chicago-based Coyote in 2015, a company it already relied on to provide extra capacity during peak holiday shipping seasons. Coyote arranges shipments for trucking companies in its network using available space on contracted trucks, and UPS said at the time it saw opportunities for “growth, synergistic efficiencies and transfer of best practices and systems.”
But Tome reported a sharp decline in revenue and profits earlier this year and announced cost-cutting plans, due to business losses caused by a volatile economic situation and tense labor negotiations last year.
UPS' The job cuts include eliminating 12,000 jobs and a renewed focus on driving efficiency.
Tomé announced plans in January to explore strategic alternatives, including potentially selling Coyote. He was a director when the company was acquired in 2015, but said “at the time I don't think we fully understood how cyclical this business was,” leading to sharp fluctuations in revenue and low profit margins.
UPS saw a surge in delivery demand during the COVID-19 pandemic as consumers ordered thousands of items to be delivered to their homes, but then saw volumes decline, hurting its performance last year.
Overall, UPS reported 2023 revenue of about $91 billion, down 9.3% year-over-year, and profit of $6.7 billion, down 42% from 2022.
Under the terms of the agreement, RXO will pay Coyote $1.025 billion in cash and will continue to provide brokered transportation services to UPS under a contract that runs through January 2030.
RXO said the deal will increase the number of customers with more than $1 million in transactions by approximately 80%. Both RXO and Coyote offer asset-light, technology-enabled transportation brokerage services. Coyote's digital freight platform allows businesses to book freight transport and matches more than 10,000 shipments per day with a network of 100,000 carriers.
Coyote expects revenue of about $3.2 billion in 2023 and earnings before interest, taxes, depreciation and amortization of about $86 million, according to RXO.
RXO said it expects to realize at least $25 million in annual cost synergies from the Coyote acquisition.
RXO said Coyote employees will become RXO employees once the acquisition is complete, but did not provide details on how those employees will be affected.
“We look forward to welcoming Coyote employees to our team and working together to achieve great results for our customers, shareholders, carrier partners and employees for many years to come,” RXO CEO Drew Wilkerson said in a written statement.
UPS served as legal advisor and JPMorgan Securities as financial advisor on the transaction.
