UPDATE: March 18, 2021 XPO Logistics has given a new name to its contract-logistics business: GXO.

The brand represents "three letters that stand for the game-changing opportunities we’re bringing to the table ... with a nod to our XPO heritage," Bradley Jacobs, XPO CEO, said in a press release.

Components of the new brand, such as the name and logo, will become effective when the spinoff is complete. XPO expects that to occur in the second half of this year. At that time, Malcom Wilson, the CEO of XPO's European business, will become the CEO of GXO.

Dive Brief:

• XPO Logistics will split into two independent companies, according to an announcement Wednesday. The move is set to be finalized in the second half of 2021.
• When the move is complete, one entity, called XPORemainCo, will be a global LTL carrier and transport broker. The other, called NewCo, will be a contract logistics provider, the announcement said. Each is expected to trade on the New York Stock Exchange.
• Bradley Jacobs will serve as chairman and CEO of XPORemainCo and will become chairman of the NewCo board, and Troy Cooper will serve as president of XPORemainCo, should the spinoff be completed as planned.

Dive Insight:

XPO's move marks a turnaround after years of acquisitions to build the business. The carrier aims to increase its equity value by simplifying and creating "two pure-play industry powerhouses," the announcement said.

XPORemainCo would be the third-largest LTL in North America and the second-largest truck brokerage provider worldwide, the company said. As of Sept. 30, XPO was operating in 17 countries with some 38,000 employees and 724 locations, according to the announcement.

NewCo would be the second-largest contract logistics company in the world, with some 200 million square feet of warehousing, the company said. As of Sept. 30, asset-light logistics operations were active in 27 countries, with 766 locations and some 58,000 employees, the company said.

The contract logistics business would encompass warehousing, omnichannel fulfillment, reverse logistics, cold-chain logistics and supply chain optimization. It would also be the largest outsourced e-commerce fulfillment platform in Europe, the company said. And the business would house the XPO Direct shared-space distribution network.

XPO believes it is unintentionally offering a "conglomerate discount" under its current model, according to an investor presentation. Despite positive performance metrics, the company said, many peers have higher valuations.

"The company's performance needs to be more obvious — and it would be, as two, focused, pure-plays without the conglomerate overhang," presentation slides read. The separate companies would be compared to only others with the same services.

The ability to focus operations also provides the ability to develop more proprietary technology, XPO said. And separate investor bases could potentially increase equity value, according to the presentation. XPO would still have its eye on M&A, with which a higher equity value would assist.

XPO hinted at the possibility of a spinoff as its board "authorized a review of strategic alternatives" in January with the goal of increasing share price, though it terminated the review in March "in light of current market conditions," according to a filing with the Securities and Exchange Commission.

The company made it clear in the January notice that it would not spin off its North American LTL unit — and the segment will remain, as the placeholder name implies.

On XPO's Q3 earnings call in November, Chief Strategy Officer Matt Fassler described "emerging opportunity" within LTL, as e-commerce drives growth in the segment. "Very optimistic about our ability to capitalize on this secular trend," he said.

This story has been updated with additional details. Shefali Kapadia contributed to this report.