RXO (RXO) M&A Announcement summary

Deal rationale and strategic fit

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

• The deal brings significant vertical diversification, minimal customer overlap, and complementary end markets, enhancing network density and exposure to food, beverage, transportation, retail, and industrial sectors.

• The acquisition aligns with a long-term strategy of combining organic growth with strategic M&A to accelerate market share gains and capitalize on industry consolidation.

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

• A multi-year commercial agreement with UPS, running through January 2030, ensures UPS remains a major customer post-acquisition.

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.

• The transaction is expected to be immediately and significantly accretive to adjusted EPS and free cash flow, with neutral impact on leverage and a commitment to investment-grade credit metrics.

• Coyote generated $3.2 billion in revenue, $470 million in gross margin (14.5%), and $86 million in adjusted EBITDA in 2023.

• Purchase price equates to 11.9x 2023 adjusted EBITDA before synergies and 9.2x after synergies.

• RXO will serve over 19,000 customers and 212,000 carriers, with expanded reach across key verticals.

Synergies and expected cost savings

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

• 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.

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