RXO (RXO) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition of Coyote Logistics for $1.025 billion will create the third-largest brokered transportation provider in North America, significantly expanding scale and market presence.

• The deal diversifies end markets and customer base, with minimal customer overlap and complementary verticals, expanding reach into food, beverage, transportation, retail, and industrial sectors.

• The acquisition accelerates growth in the middle market and small to medium-sized business segments, with cross-selling opportunities and enhanced network density.

• RXO will leverage Coyote's technology and customer relationships to drive operational excellence and long-term growth.

• A multi-year commercial agreement with UPS as a customer through January 2030 strengthens long-term revenue streams.

Financial terms and conditions

• Purchase price is $1.025 billion on a cash-free, debt-free basis, funded by a mix of equity and debt, including $300 million from MFN Partners, $250 million from Orbis Investments, and backstopped by Goldman Sachs.

• Coyote generated $3.2 billion in revenue, $470 million in gross margin, and $86 million in adjusted EBITDA in 2023.

• The deal is expected to be immediately and significantly accretive to adjusted EPS and free cash flow, and neutral to leverage.

• Acquisition multiples are 11.9x 2023 adjusted EBITDA pre-synergies and 9.2x post-synergies.

• Permanent capital structure will be finalized before close, targeting investment-grade credit metrics and 1x-2x leverage long-term.

Synergies and expected cost savings

• At least $25 million in annualized cost synergies are expected within the first year, primarily from technology, operations, back office, and procurement efficiencies.

• Additional upside is anticipated from improved transportation purchasing power and process improvements, not included in the initial synergy estimate.

• Post-synergies, adjusted EBITDA is projected to increase from $218 million to $243 million.

• Integration costs are estimated at around $15 million one-time.

• The combined company will benefit from increased network density and operational efficiencies.