Montreal-based TFI International Inc. is acquiring UPS Freight, the less-than-truckload (LTL) and dedicated truckload (TL) divisions of United Parcel Service, Inc.
The deal is for US$800 million. Approximately 90 percent of the acquired business will operate independently within TFI International’s LTL business segment under its new name, “TForce Freight”. Acquired dedicated TL assets will join TFI’s TL business segment.
The transaction is subject to usual and customary closing conditions, including regulatory approvals.
“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 International.
“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.
According to Bédard, TForce Freight will continue to serve UPS’s LTL distribution needs, and UPS will continue to provide freight volumes and other services to TForce Freight after the transaction for at least 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 US and aligning with UPS’ ‘Better not Bigger’ strategic positioning,” he added.
The assets acquired include a network of 197 facilities (147 of which are owned).
“We see compelling opportunities to improve TForce Freight’s efficiency and productivity and apply our proven business model to drive long-term value creation. We look forward to the new TForce Freight thriving in the years ahead under the TFI International umbrella,” Bédard concluded.
UPS Freight generated approximately US$3 billion in revenue in 2020 and approximately broke even from an operating income perspective. The transaction is expected to be accretive to diluted EPS in 2021.
Going forward, TFI International expects to realize significant near- and long-term opportunities to improve TForce Freight’s operating margin through separate management of LTL and dedicated TL businesses, operating efficiencies and providing superior products to our customers.
The base enterprise value of the transaction is US$800 million on a cash-free, debt-free basis, subject to closing adjustments and customary post-closing true-ups.
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, lowering maintenance costs, improving both efficiency and safety, and enhancing customer service and driver satisfaction.
The transaction has been unanimously approved by the boards of both TFI and UPS and is expected to close in the second quarter of 2021 subject to customary closing conditions including regulatory approvals.