UPS to Sell Coyote Logistics to RXO

$1 Billion Sale Price Is Less Than It Paid in 2015
Coyote Logistics door
UPS bought Coyote Logistics from private equity firm Warburg Pincus in 2015. (Coyote Logistics via YouTube)

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UPS Inc. has entered into a definitive agreement to sell its asset-light freight brokerage business, Coyote Logistics, to RXO Inc., the company announced June 23.

RXO expects the transaction will enhance its market position, diversify its customer base and broaden its carrier network. The company plans to fund the acquisition with a mix of equity and debt with the purchase price for the business being set at $1.025 billion.

UPS acquired Coyote Logistics from private equity firm Warburg Pincus for about $1.8 billion in 2015. 

UPS ranks No. 1 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 4 on the TT Top 100 list of the largest logistics companies. RXO ranks No. 20 on the logistics TT100. Coyote ranks No. 4 on the TT list of the top freight brokerage firms.

“As UPS positions itself to become the premium small-package provider and logistics partner in the world, the decision to sell our Coyote Logistics business allows an even greater focus on our core business,” said Carol Tomé, CEO of UPS.


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RXO’s board of directors unanimously approved the transaction, though it still is subject to customary closing conditions and regulatory approvals. The deal is expected to close by the end of the year. RXO also expects the transaction to be immediately and significantly accretive to its adjusted diluted earnings per share and adjusted free cash flow. 

“RXO’s highly accretive acquisition of Coyote will immediately increase the scale of our brokerage business, providing customers with more capacity across a wider array of power lanes,” said Drew Wilkerson, CEO of RXO. “RXO will realize significant synergies from the acquisition by quickly integrating Coyote’s business into RXO and leveraging our cutting-edge technology.” 

Coyote generated about $3.2 billion in revenue last year. It also reached approximately $470 million in gross margins and $86 million of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). 

“The addition of Coyote’s customer base will diversify RXO’s vertical mix and will increase the number of customers that do more than $1 million in business with us by approximately 80%,” Wilkerson said. “This acquisition will provide RXO with both immediate and long-term opportunities for revenue and earnings growth and will generate significant returns for shareholders.”

TD Cowen noted in a report that the agreed upon purchase price was reasonable at about nine times the anticipated EBITDA for next year. The investment bank and financial services company estimates that scale-driven purchased transportation and operating expense synergies should drive immediate EBITDA and EPS accretion despite debt and equity issuance.


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“The deal is expected to make RXO the third-largest freight brokerage in North America, moving up five spots,” TD Cowen analyst Jason Seidl wrote in the report. “The deal is expected to close in late ’24, and RXO management expects immediate [adjusted] EBITDA and  [adjusted] EPS accretion on synergies.”

Susquehanna International Group analyst Bascome Majors included his initial thoughts on the deal in his second-quarter preview report. He noted there are still far too many unknowns to model the combined company in a deal that won’t close until later this year, but his sense is that the transaction could be meaningfully to earnings per share.

“Our RXO forecasts remain stand-alone only, but we’re adding $2 to our target price today for a very preliminary look at potential EPS accretion to 2025,” Majors said. “Broken down, our target price of $14 is based on an unchanged 24 times [price-to-earnings] on our reduced stand-alone 2025 EPS of 50 cents, plus $2 in value for potential Coyote accretion.”

Goldman Sachs & Co. is serving as financial adviser to RXO, while Paul, Weiss, Rifkind, Wharton & Garrison is serving as its legal adviser. J.P. Morgan Securities is serving as the exclusive financial adviser to UPS, and King & Spalding is serving as the legal adviser.