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XPO breakup advances, intermodal unit sold to STG Logistics

First step in creating a pure-play LTL completed

XPO one step closer to being a standalone LTL (Photo: Jim Allen/FreightWaves)

XPO Logistics announced Friday the divestiture of its intermodal unit to STG Logistics for $710 million in cash. The sale is part of the company’s plan to break up the assets remaining after the spinoff of its contract logistics segment last year.

STG is an asset-light containerized logistics provider based in Chicago. The company has been rolling up assets with the backing of middle-market private equity firm Wind Point Partners. The two had acquired 10 logistics outfits over the last five years before the deal with XPO. In conjunction with the transaction, STG was recapitalized by Wind Point and with funds from Oaktree Capital Management.

XPO’s intermodal segment provides rail brokerage and drayage services through 48 locations with a fleet of 11,000 containers, 2,200 tractors and 5,200 chassis. The unit generated $1.2 billion in revenue last year, reporting up through the brokerage and other services division, which posted a 6.1% adjusted earnings before interest, taxes, depreciation and amortization margin. Assuming similar margins in the intermodal unit, the deal price implies a 10x trailing EBITDA multiple.

STG will also inherit approximately 700 employees in the deal.

“I could not be more excited about this game-changing acquisition,” STG CEO Paul Svindland stated in a separate release. “Once combined, the STG network will be able to handle a container from the instant it’s ready at a port or customer facility to the moment each individual shipment arrives at its final destination, all the while providing customers full visibility and a single source of accountability.”

Svindland was the chief operating office at Pacer International, which was acquired by XPO in 2014. Pacer along with the acquisition of Bridge Terminal Transport in 2015 were the foundation for XPO’s intermodal unit. 


“This divestiture simplifies our business model and moves our capital structure closer to investment-grade — two priorities in our strategic plan to unlock significantly more value for our stakeholders,” stated Chairman and CEO Brad Jacobs.

XPO to become a pure-play LTL

XPO is planning to spin off its brokered transportation business into a separately traded public company in the fourth quarter, leaving XPO as a standalone pure-play less-than-truckload company. Both public companies are expected to see significant deleveraging from the process, which also includes a separate debt refinancing.

Net debt-to-adjusted EBITDA is forecast to be approximately 1x at each company following the transactions. That compares to 2.7x at the end of 2021, which was outside of investment-grade parameters.

The combined stock prices of the two entities are expected to gap higher as well. Each company (as a standalone) is expected to see a valuation re-rating more in line with peers versus the 12x 2022 earnings multiple XPO’s stock was trading at prior to the announced split. Several analysts have weighed in since the March 8 announcement suggesting the brokerage entity could see a mid-teens multiple with the LTL company (XPO) reaching a multiple north of 20 over time.

The sale of intermodal was the first step in the breakup process.

“We’ve completed a key step in preparing for our planned spinoff, when we’ll separate XPO into two publicly traded leaders in less-than-truckload transportation and tech-enabled brokered transportation services,” Jacobs added.

XPO is still looking to divest its European transportation unit, which generated $3.1 billion in revenue last year, through sale or public listing.

XPO spun off its contract logistics business into a new public company, GXO (NYSE: GXO), in August.

Raymond James acted as financial adviser to XPO.

Click for more FreightWaves articles by Todd Maiden.

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Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.
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