RXO Agrees to Buy UPS Unit Coyote Logistics for $1 Billion

Delivery trucks parked outside a UPS hub in the Brooklyn borough of New York.

(Bloomberg) -- RXO Inc. has agreed to buy United Parcel Service Inc.’s asset-light freight brokerage business, Coyote Logistics, for more than $1 billion.

The deal will make RXO the third-largest provider of brokered transportation in North America.

The Charlotte, North Carolina-based company will fund the deal with a mix of equity and debt, including a $300 million equity investment from MFN Partners and a $250 million equity investment from Orbis Investments, two of RXO’s largest shareholders, the company said Sunday in a statement.

“RXO will realize significant synergies from the acquisition by quickly integrating Coyote’s business into RXO and leveraging our cutting-edge technology,” said Drew Wilkerson, chief executive officer of RXO. “The addition of Coyote’s customer base will diversify RXO’s vertical mix and will increase the number of customers that do more than $1 million in business with us by approximately 80%.”

RXO has agreed to a deal with UPS to provide its brokered-transportation needs through January 2030. The deal ends UPS’s nine-year involvement with Chicago-based Coyote, which it bought in a $1.8 billion deal from private equity firm Warburg Pincus in 2015.

Coyote had about $3.2 billion in revenue in 2023, with approximately $470 million in gross margin and $86 million of adjusted earnings before interest, taxes, depreciation and amortization. RXO expects annualized cost synergies of at least $25 million from the deal and reaffirmed its outlook for second-quarter adjusted Ebitda between $24 million and $30 million.

Goldman Sachs Group Inc. is serving as financial adviser to RXO, and Paul, Weiss, Rifkind, Wharton & Garrison is serving as its legal adviser.

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