UPS to Buy Coyote Logistics
United Parcel Service (NYSE:UPS – $102.36) has agreed to acquire Chicago-based Coyote Logistics, LLC, a technology-driven truckload freight brokerage company for $1.8 billion from private-equity firm Warburg Pincus. Founded in 2006, Coyote Logistics is one of the most innovative and fastest-growing third-party logistics service providers in North America. Coyote, does not own its own fleet, but offers supply chain services for more than 6,000 truckloads per day for shippers of all sizes and industries, from Fortune 100 companies to small businesses. The company 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 enjoys strong market positions among food and beverage and consumer goods customers, as well as paper and packaging, industrial and retail segments. Coyote’s technology has helped it rise quickly in a competitive, yet highly fragmented, market and booked $2.1 billion in revenue last year. Following the 2014 acquisition of Access America Transport to its network, Coyote added industry leading strength in flatbed serviced segments such as heavy equipment and construction. UPS has been contracting with Coyote since 2012 to find extra truck space for its growing flood of holiday e-commerce traffic. UPS expects the addition to start contributing to earnings next year, eventually pitching in $100 million to $150 million annually to its bottom line. Closing is expected within 30 days, subject to customary conditions and regulatory approvals. The transaction will be financed with available cash resources and through existing and new debt arrangements. UPS posted second-quarter results solidly above consensus estimates on Tuesday and the shares gained 8% on the week. Long-term total return potential for Atlanta-based UPS is above average, in my opinion, especially when viewed on a risk-adjusted basis.