TFI International Inc. (TFI) is buying UPS Freight, the less-than-truckload (LTL) and dedicated truckload (TL) division of United Parcel Service Inc., for $800 million, the two companies announced.
Approximately 90% of the acquired business will operate independently within TFI International’s LTL business segment under a new name, TForce Freight. Acquired dedicated TL assets will join TFI’s TL business segment. The deal is expected to close during the second quarter of the year.
In 2020, UPS Freight generated about $3 billion in revenue and was approximately breakeven from an operating income perspective, according to the companies. The transaction is expected to be accretive to diluted EPS in 2021. Going forward, TFI plans to look for near- and long-term opportunities to improve TForce Freight’s operating margin through separate management of LTL and dedicated TL businesses and operating efficiencies.
“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 CEO of TFI. “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’s 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 to UPS in Canada. This transaction is a ‘win-win’, allowing TFI to continue our strategic expansion across the U.S. and aligning with UPS's ‘Better not Bigger’ strategic positioning.”
In December 2020, UPS Freight increased the per package minimum for non-contractual Ground with Freight Pricing (GFP) shipments to 4.9%, which meant the published per package minimum increased from $8.23 to $8.76 per package.
While UPS stock has dropped 7.5% over the past three months, UPS will retain responsibility for all pre-closing pension obligations, taxes, and accident and workers’ compensation liability claims and costs. TFI intends to make targeted investments in the LTL fleet in the first 12 months following the transaction.
“The assets acquired include a network of 197 facilities (147 of which are owned), and combined with TFI’s Canadian LTL operations, will create what we believe to be North America’s single most comprehensive LTL network, especially as we continue our expansion into Mexico leveraging our existing LTL brokerage operations there,” Bedard added. “Given our soon to be expanded, comprehensive and highly efficient network, we’re eager to work with our new colleagues to optimize performance and are very pleased to welcome the entire UPS Freight family to TFI International.”
The transaction has been unanimously approved by the boards of both TFI and UPS and is subject to customary closing conditions, including regulatory approvals.
