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With at least $2 billion in cash, and $500 million in credit available, XPO Logistics Chairman and CEO Brad Jacobs says he would consider an acquisition if the company was a good fit.
That was among the topics Jacobs discussed in a wide-ranging interview with Transport Topics Radio on SiriusXM Channel 146.
“I don’t rule out doing [mergers and acquisitions]. We’re good at M&A. We’ve got great success at buying 17 of the best companies that were in the industry and then highly integrating them and getting great synergies and putting them on common platforms and systems, and it’s worked very well,” Jacobs said. “We’ve created a lot of value for our shareholders.
“I don’t rule it out, but I’ve never bought a company over Zoom, though that could be a new experience: doing M&A by a videoconference.”
Jacobs declined to identify any company he’s interested in acquiring. However, he does believe the worst of the coronavirus pandemic must pass before he’d make a purchase.
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“I think, realistically, we have got to get back into action first before we seriously can talk about M&A,” Jacobs said. “We’ll keep an open mind, but we’ll be rational and disciplined.”
Still, with Jacobs possibly looking at future purchases, it would mark a return to familiar territory. In September 2011, he headed an investment group that acquired a majority share of Express-1 Expedited Solutions, assumed the positions of chairman and CEO, and renamed the company XPO Logistics. At the time, XPO rapidly began buying businesses and transformed from a $100 million-a-year operation to a more than $16.6 billion trucking and logistics operation in 2019.
From 2011 to 2015, XPO acquired and integrated 17 companies. Its most recent purchase was in September 2015, when it bought logistics and transport company Con-way for $3 billion.
Last September, Jacobs told analysts with Morgan Stanley he was spending 10% to 15% of his time looking at possible mergers and acquisitions. That statement marked a significant change from February 2019, when he said the amount of time spent contemplating purchases was zero.
In its first-quarter earnings report released May 5, XPO Logistics said it was doing reasonably well until the coronavirus pandemic shut down much of the world economy the second week of March.
“January and February we were going to beat expectations; we were feeling really good,” Jacobs said. “Even the first couple weeks of March were looking good, until that infamous Friday the 13th, March 13, when the whole pandemic blew up here, and everything blew up here, pretty fast.”
The Greenwich, Conn.-based company posted net income of $25 million for the quarter, a 51% decline compared with $52 million a year earlier. Diluted earnings per share fell to 20 cents from 37 cents a year earlier. Revenue dipped to $3.86 billion, 6.3% percent lower than the $4.12 billion logged in the same period in 2019.
RELATED: XPO Profits, Revenue Fall in Q1
In response to the downturn, Jacobs said XPO quickly took two significant actions. For one, it scuttled a plan announced earlier this year to review strategic alternatives, including the possible sale or spinoff of one or more of its business units. It also created a plan to support its workforce amid the pandemic.
XPO created a health protocol for its workers that included a tracing system for people who might have been exposed to COVID-19. It also launched a deep-cleaning regime for its facilities.
Additionally, XPO established front-line appreciation pay for nearly 40,000 employees in the U.S. and Canada. Hourly employees in its warehouses receive an extra $2 per hour on top of their regular pay rate. Later this month, full-time employees working in its less-than-truckload service centers will receive a one-time bonus of $500, and part-time employees will receive a $250 bonus.
The logistics company also will provide two weeks of additional paid pandemic sick leave to employees who need it, and has expanded mental health programs for employees and dependents.
“Everyone has stayed at home, and sheltered in place except our drivers, except our warehouse workers, except our employees on the docks,” he said. “Those front-line workers made it happen. They kept society functioning, and they got people their Purell and their toilet paper and their food, and so I’m grateful to them. I’m so deeply indebted to them and appreciative of the efforts our drivers and other front-line workers are making. These are amazing human beings.”
With operations around the globe, Jacobs said he’s monitoring the condition of the world economy, and the U.S. still is several months behind China and several European nations in terms of an economic recovery. But he’s optimistic in the long run.
“We are a very vibrant country, a creative entrepreneurial, can-do-attitude type of country, and people don’t like staying down. They like to get up and fight and fight the good fight, and making things happen,” Jacobs said. “I think things will come back, fast and furious.”
XPO Logistics ranks No. 1 on the Transport Topics Top 50 list of the largest logistics companies in North America, a position the company has held since 2017. It ranks No. 3 on the TT Top 100 list of the largest for-hire carriers in North America.
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