RXO set to acquire UPS freight brokerage for $1.025 billion By Investing.com

In a significant move within the transportation services sector, RXO, Inc. (NYSE:RXO) has announced the planned acquisition of a major freight brokerage business from United Parcel Service (NYSE:) of America, Inc. (NYSE:UPS), and its affiliates for $1.025 billion in cash. The transaction, which is subject to customary closing conditions, is expected to enhance RXO’s asset-light truckload freight brokerage services.

The deal, initially reported on June 21, 2024, involves RXO purchasing technology-driven truckload freight brokerage services and certain assets related to haulage, dedicated transport, and warehousing services in the United Kingdom. The acquisition is poised to conclude following the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which occurred on August 1, 2024.

Today, RXO filed a Form 8-K with the SEC, providing audited and unaudited financial statements of the business to be acquired. The filing includes the audited combined financial statements for the years ended December 31, 2023, and 2022, alongside unaudited combined financial statements for the six-month periods ended June 30, 2024, and 2023.

Additionally, RXO has presented unaudited pro forma condensed combined financial information to reflect the potential impact of the acquisition on its finances.

This news comes as RXO continues to navigate the complex transportation services landscape, and the acquisition is indicative of the company’s growth-oriented strategy. The information provided in the SEC filing is based on a press release statement.

In other recent news, RXO, a prominent player in asset-light transportation solutions, introduced a prepaid feature for its RXO Fuel Card, allowing drivers to pre-fund their fuel purchases. This development is part of RXO’s broader strategy to provide value-added services to its customers.

Additionally, RXO has secured $550 million through private financing for the acquisition of Coyote Logistics, a UPS subsidiary focused on truckload freight brokerage. The acquisition is expected to close in the early fourth quarter.

The company’s financial flexibility has been extended through an amendment of its credit facilities, introducing a new $200 million delayed draw term loan facility and extending a $600 million revolving credit facility. These measures are expected to provide RXO with the necessary liquidity to pursue the Coyote Acquisition.

In terms of analyst ratings, Susquehanna raised RXO’s stock price target to $20.00 from the previous $14.00 but maintained a Negative rating on the stock. TD Cowen also maintained its Hold rating on RXO, raising the price target to $28.00 from the previous $23.00.

These are some of the recent developments in RXO’s ongoing operations and strategic planning.

InvestingPro Insights

The latest strategic acquisition by RXO, Inc. (NYSE:RXO) reflects the company’s growth ambitions within the transportation services sector. To provide additional context to investors, certain InvestingPro metrics and tips can offer a deeper understanding of RXO’s current financial position and market sentiment:

InvestingPro Data indicates that RXO has a market capitalization of approximately $3.7 billion and is trading at a high Price / Book multiple of 6.4, suggesting a premium valuation compared to its book value. The company’s revenue for the last twelve months as of Q2 2024 stands at $3.797 billion, although it has experienced a revenue decline of 10.26% during the same period. These figures point to a challenging revenue landscape, yet RXO maintains a Gross Profit Margin of 18.3%, underscoring its ability to retain earnings above the cost of goods sold.

Investors should note the InvestingPro Tips that highlight RXO’s expected net income growth this year, which aligns with the company’s expansion efforts. However, caution may be advised as 10 analysts have revised their earnings estimates downwards for the upcoming period. Despite this, the company has seen a strong return over the last three months, with a 30.53% price total return, and over the last year, with a 51.9% price total return, reflecting positive market momentum.

For those seeking more comprehensive analysis, there are additional InvestingPro Tips available that provide further insights into RXO’s financial health and projections. These tips can be accessed through the InvestingPro platform, which currently lists a total of 12 tips for RXO, offering a broad spectrum of investment considerations. For more detailed information, investors can visit https://www.investing.com/pro/RXO.

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