Dive Brief:
- XPO announced the sale of its truckload business to TransForce for $558 million last week, according to a company press release.
- The company intends to use the proceeds from the sale to pay down debt. The scope of the inventory sold involved tractors and trailers, initially acquired through XPO's 2015 purchase of Con-way Inc.
- With this addition to its existing fleet, TransForce will become a substantial presence in the Mexico freight corridor.
Dive Insight:
XPO made a splash with its acquisition of Con-way last year, and rapid growth to a Top 25 ground freight carrier. In 2013, XPO recorded just $702 million in annual revenue, a figure which had risen to $7 billion by the end of 2015. The company raised another $7 billion in just the first half of 2016.
So why is the company divesting its truckload operation?
For one, the freight industry as a whole is suffering from decreased demand and heavy competition. The company stated in its press release it sought to decrease its services to focus on areas where it could command a competitive advantage, notably in the LTL market.
Meanwhile, Transforce's acquisition of the portfolio shows the company's bid to become a cross-North America truckload provider. XPO Logisitcs will transfer 3,000 tractors, 7,500 trailers and 29 locations to the Canadian compnay, according to the Wall Street Journal, bolstering its North American capacity.
For Transforce, growth at a time of disruption within the industry may be a gamble, as is XPO's bid towards Less than Truckload, which is becoming more popular as the markets move to lower shipment sizes.
