Business
UPS said on Friday it will buy Coyote Logistics for $1.8 billion. UPS, which is acquiring Coyote Logistics from private-equity firm Warburg Pincus LLC, said Friday that the acquisition should create $100 million to $150 million in annual operating synergies and start adding to earnings in 2016, reports the Wall Street Journal. Coyote Logistics will operate as a separate subsidiary and keep its name.
The move will add new service offerings to UPS’s portfolio in the fast-growing freight brokerage business at a time when the delivery giant has been striving to maintain its profitability and reduce costs after tough back-to-back holiday seasons and a movement among shippers toward slower and cheaper delivery methods. Revenue for U.S. third-party logistics providers, which provide services ranging from booking truck drivers to managing warehouses, rose 7.4% to $157.2 billion last year, faster than the 2.8% growth in logistics spending overall, according to research firm Armstrong Associates. Coyote Logistics reported annual revenue of $2.1 billion in 2014 and is growing by double digits each year, according to UPS.
Bloomberg writes that while UPS doesn’t break out its full-truckload brokerage revenues, a spokesman, Steve Gaut, said the acquisition would accelerate those sales. “The brokered full-truckload freight segment is a high growth market and we expect it will continue to outpace other transportation segments,” UPS Chief Executive Officer David Abney said in a statement. The deal combines UPS and its 100,000 ubiquitous brown package vans and other vehicles with Coyote’s experience linking customers to a chain of 35,000 trucking companies. The partnership will help reduce the number of trips UPS drivers make without generating a return, according to Gaut.
After a delivery, UPS drivers often have to go back to their starting point, sometimes without much cargo to haul. UPS makes about 7 million of these so-called empty leg trips every year. Coyote, whose clients range from food and drink companies to retailers and paper and industrial firms, should be able to help fill some of those empty trailers with customers’ goods in the future, Gaut said.
