Tuesday, July 16, 2013

XPO Logistics to Acquire 3PD, the Largest Provider of Heavy Goods, Last-Mile Logistics in North America

Addition of last-mile delivery strengthens XPO's position as a single-source supply chain partner

GREENWICH, Conn. —July 15 — XPO Logistics, Inc. ("XPO Logistics," "XPO" or "the company") (NYSE: XPO) today announced that it has entered into a definitive agreement to acquire all of the common stock of 3PD, Inc. ("3PD") in a transaction valued at approximately $365 million. 3PD is the largest non-asset, third party provider of heavy goods, last-mile logistics in North America. The acquisition is expected to be immediately and significantly accretive to earnings.

The transaction reflects an aggregate consideration of approximately $357 million of cash and $8 million of XPO restricted stock, and is expected to close in the third quarter of 2013, subject to Hart-Scott-Rodino clearance and customary conditions. The company has obtained a commitment from Credit Suisse Group for a $195 million term loan, which together with cash on hand is sufficient to fund the transaction.

3PD, based in Atlanta, was founded by Karl and Randy Meyer in 2001 to capitalize on rapid growth in the last-mile logistics segment serving retail shippers. Today, 3PD is the premier logistics provider of its kind in North America, facilitating approximately two times more annual deliveries than its nearest competitor. The business reported year-over-year growth in adjusted EBITDA1 of 20 percent and 36 percent for the full year 2012 and the first five months of 2013, respectively; and trailing 12 months revenue of $319 million through May 31, 2013.

3PD provides blue chip retailers with customized solutions tailored to their supply chain needs, and serves small and mid-sized shippers by matching them to carriers on a transactional basis. The business has differentiated itself through its ability to assure a superb customer experience using proprietary technology and industry-leading process management. 3PD was named an Inbound Logistics Top 100 third party logistics provider and a Transport Topics Top 50 logistics company for 2012. All of 3PD's executives have agreed to join XPO and will continue to lead the operation.

Bradley Jacobs, chairman and chief executive officer of XPO Logistics, said, "Our acquisition of 3PD advances our strategy for rapid, disciplined growth in non-asset transportation logistics. 3PD is the clear market leader in the heavy goods, last-mile delivery space – an extremely fast-growing segment that serves blue chip retailers, e-commerce companies and smaller retailers. XPO will be a direct provider of a high-margin, high cash flow service that's filling a growing need of consumers and shippers, including our own customers."

Jacobs continued, "We're extremely pleased that Karl and his management team will be staying on to lead the business. They've built 3PD into the first choice of heavy goods shippers by delivering outstanding results in an exacting service environment. 3PD's offerings fit squarely within our core competency and complement our current range of services. Very soon, 3PD's customers will have the convenience of white glove deliveries, truck brokerage, freight forwarding and expedite services through a single source."

Karl Meyer, chairman and chief executive officer of 3PD, said, "We're eager to join the XPO family and extend our track record of outpacing industry growth. We can cross-sell our services and share customer-centric technologies. The 3PD team understands, as XPO does, the importance of creating a world-class customer experience."


Credit Suisse Group is serving as financial advisor to the board of directors of XPO Logistics, and Morgan Stanley & Co.LLC is serving as financial advisor to the board of directors of 3PD.

The Market Opportunity:

3PD operates within one of the fastest-growing segments of transportation logistics, where providers typically generate high margins and strong cash flow. Shippers of heavy goods spend approximately $12 billion on last-mile deliveries each year in North America. These deliveries often require white glove services by the carrier, which creates a premium price structure for existing providers and a significant barrier to entry. Demand for heavy goods, last-mile logistics is being driven by two market dynamics: a trend toward outsourcing high-touch shipments, and the rapid expansion of e-commerce retailing. Outsourcing provides retailers with greater cost efficiency and better service than they could achieve by managing last-mile deliveries on their own. E-commerce is the fastest-growing channel for retail purchases, with double-digit annual growth projected over the next four to five years.