XPO Logistics Inc. (NYSE:XPO) shares jumped around 15% after the company announced that it was considering structural changes that include spinoffs. Since the start of last year, the company’s shares have gained 45%.
XPO to sell at least four of its units
Despite the exceptional performance since the start of last year, the company’s CEO Bradley Jacobs feels that the company is undervalued. He said that XPO has continued to trade below the sum of its parts and well below its pure-play peers. Jacobs added that as a result, they are committed to considering their options to maximize shareholder value.
The company wants to unlock more value by selling around four of its business units, according to Jacobs. Although the logistics company has not indicated which businesses they will spinoff, it nonetheless plans to keep the less-than-truckload segment that handles small freight. The company will likely exit the European transportation, North American transportation, European transportation, and supply chain operations in the Asia Pacific regions and North America.
The Connecticut based company generates most of its revenue from the transportation units, with 35% of its sales coming from the Logistics segment. XPO has not given a timetable of the restructuring, but it could likely spinoff or sell one or more business segments.
The logistics sector has been consolidating, XPO is following suit
Over the years, the transportation and logistics market has been consolidating because of high fragmentation, and companies could benefit from scale. In 2019 several deals worth $47 billion were announced in North America, which is a 47% increase from the previous year. Since Jacobs took over in 2011, XPO has announced around 19 deals worth $7.5 billion.
The company has hired JPMorgan and Goldman Sachs to help it is exploring its options for the next move. The CEO could not confirm whether there has been any company that has already bid for the units it wants to sell. He retaliated that XPO’s consumer and retail units are very strong, with the e-commerce unit also growing fast.
