UPS has bought Coyote Logistics, which has major operations in Chattanooga, for about $1.8 billion.
Advertisement
Coyote arranges customers’ freight shipments on available trucking capacity contracted to members of its large carrier network, numbering more than 35,000 trucking companies. The company as a whole will be able to maintain its profitability as it reduces costs after the peak holiday shipping season, striving for cheaper and better delivery methods.
A prized addition to UPS’s portfolio will be Coyote’s proprietary technology, Mr. Gershenhorn said. UPS has about seven million empty leg trips annually; utilizing that space will raise revenue.
“This deal shouldn’t move the needle at UPS, but could support shares of smaller brokers near-term by driving further consolidation speculation”, Susquehanna Financial Group analyst Bascome Majors wrote in a note on July 22, when Bloomberg reported of a possible UPS-Coyote Logistics deal.
One big addition to the portfolio of UP will be the technology of Coyote, which allows customers to book and to sell empty space on existing trucks.
In a separate matter, FedEx Corp. hit some regulatory scrutiny on the acquisition front.
On its earnings call in June, FedEx executives said they did “not believe that the transaction faces any competition issues for the Commission”. UPS had tried to acquire TNT Express about two and half years ago but the European Regulators had opposed the deal.
Revenue for third-party U.S. logistics providers, which provide these services ranging from the booking of truck drives to the management of warehouses, increased 7.4% to more than $157.2 billion in 2014, faster than the growth of 2.8% in logistics spending in the industry, according to an online research company.
This transaction follows a trend of larger logistics deals this year. Days later, XPO Logistics Inc. agreed to acquire France’s Norbert Dentressangle SA in a deal valued at $3.53 billion including debt. UPS said that Coyote Logistics has been growing in the double digits and earned $2.1 billion in revenues in 2014.
Europe has also become increasingly attractive for growth.
Advertisement
UPS said on Friday that it expects the acquisition adding to its earnings next year.
