UPS recently announced that it was selling its less than load (LTL) and truckload business. TFI International will buy that business, UPS Freight, for $800 million.
The companies expect to complete the deal in the second quarter of 2021. The deal is subject to working capital and other adjustments.
UPS Rationale for the Sale
The company decided to sell after an evaluation of its portfolio. Moreover, the company says that the move aligns with its “better not bigger” strategic positioning. The company says that it will still operate more than 27,000 tractor-trailers as part of its parcel delivery service. It will retain that service, along with its freight brokerage (Coyote Logistics), its cargo airline and other assets.
“We’re excited about the future and the opportunities this creates for both UPS and UPS Freight as part of TFI International Inc.,” said CEO Carol Tomé. “The agreement allows us to be even more laser-focused on the core parts of our business that drive the greatest value for our customers.”
The company’s operators typically use trucks for bulk shipments.
UPS Freight generated roughly $3 billion in revenue last year and thus approximately broke even from an operating income perspective. The company expects the deal to add to earnings per share in 2021.
Moving forward, TFI International expects to realize significant near- and long-term opportunities to improve TForce Freight’s operating margin. It plans on separate management of LTL and dedicated TL businesses, operating efficiencies and providing superior products to its customers.
About 90% of the UPS business TFI acquires will operate independently within TFI International’s LTL business segment under its new name, “TForce Freight,” while acquired dedicated truckload assets will join TFI’s truckload business segment, TFI said.
UPS and TFI will also enter into an agreement for UPS Freight to continue to use UPS’ domestic package network to fulfill shipment for five years.
“We are pleased to announce this highly strategic transaction that will strengthen our service offerings to customers as well as our ongoing relationship with UPS,” said Alain Bédard, Chairman, president and chief executive officer of TFI International.
“Our strategy of operating independent business units with a high degree of accountability is well-suited for building on UPS Freight’s strengths and improving margins over time. TForce Freight will continue to serve UPS’ ongoing LTL distribution needs, and UPS will continue to provide freight volumes and other services to TForce Freight after the transaction for a base term of five years. We also look forward to offering expanded strategic network opportunities in Canada.”
The boards of both companies unanimously approved the transaction.
All of UPS Freight’s 14,500 workers will become employees of TFI when the sale is completed, according to a report in The Richmond Times-Dispatch. Nearly 80% of these workers employed full-time.
About TFI International
TFI International Inc. is a Canadian holding company that is parent to truckload titan CFI and other transport entities. The Canadian transport and logistics company is based in Montreal, Quebec.
TFI International acquired the United States’ third-party logistics provider DLS Worldwide from RR Donnelley & Sons for $225 million. This was one of the Canadian company’s largest acquisitions in several years. The Chicago-based DLS Worldwide generated $550 million in revenue during a recent 12-month period. After the UPS acquisition, TFI said it expects DLS will generate $22.5 million in operating income in the first four quarters. DLS has a diverse portfolio covering less-than-truckload (LTL), truckload, intermodal, freight forwarding, expedited, and parcel. In March 2020, TFI acquired the courier services business of R.R. Donnelley.