XPO further bolsters last-mile presence with acquisition of UX Specialized Logistics

Growing through acquisition is a major part of the playbook for non asset-based 3PL XPO Logistics. And while football season may be over, acquisitions are always in season, with XPO announcing late yesterday it has acquired New York, New York-based UX Specialized Logistics, a North American provider of last mile logistics services for major retail chains and e-commerce shippers.

XPO acquired UX for $59 million. Full-year 2014 revenue and adjusted EBITDA for UX was $113.2 million and $8.2 million, respectively, and for the five-year period prior to this acquisition, XPO said that UX’ revenue increased at a compound annual growth rate of 19 percent.

This acquisition further strengthens XPO’s position as the top provider of last-mile services by revenue, following acquisitions made in recent years to bolster that position, including its August 2013 acquisition of 3PD, the largest non-asset, third party provider of heavy goods, last-mile logistics in North America, a November 2013 acquisition of Optima Service Solutions, a non-asset provider of last-mile logistics, and a July 2014 acquisition of Atlantic Central Logistics, a 3PL provider of last-mile logistics services

Established in 1978, UX specializes in last-mile logistics services for the home delivery and the installation of heavy goods, including e-commerce delivery and same-day delivery services. The company has roughly 700 employees and contracted capacity of more than 1,600 independent carriers and installers. XPO said that UX will become part of its XPO Last Mile Division.

In an interview, Brad Jacobs, XPO chairman and CEO, said that UX is in the same area of last mile as XPO and facilitates around 30,000 deliveries per year.

“The density to our last-mile footprint is important, and UX has a strong and growing customer base of flagship customers on both sides of retailing, with e-commerce companies and traditional bricks and mortar storefront chains,” he noted. “They have long-term relationships with recognizable names in e-tailing and retailing, and they are customers that also have strong demand for other types of transportation and logistics services that we provide. Retailers all have truck needs, and some have intermodal or expedited, or contract logistics, and we see some huge opportunities to expand those relationships by cross-selling our services.”

Jacobs added that most of UX’ customers are high-volume shippers with niche-like markets, with XPO able to offer them more reach and capacity, as well as applying its technology to them.

Another factor making the companies a good match, he said, is that both XPO and UX are extremely customer service-focused, with UX, like XPO also conducting electronic surveys to customers each time a delivery is made.  This is an example of similar cultures between XPO and UX, Jacobs said, while adding the integration process for UX into XPO’s Last Mile division has already commenced.

Expanding its last-mile services, size and scale is a reflection of XPO’s strategy and philosophy to leverage what he said are the fastest-growing parts of the industry: last-mile, a space in which XPO is the market leader, expedited, in which XPO is also first in revenue, and intermodal, where XPO third in terms of revenue, due in large part to its acquisition of Pacer International. 

“These are the three areas that are fastest-growing in terms of demand,” said Jacobs. “E-commerce activity is a big part of this.”

The increased traction within the e-commerce-based supply chain in recent years has witnessed a major change in how consumers make different types of purchases.

As an example, he pointed to how just three or four years ago, most people would not buy a major appliance, like a refrigerator, an oven or large pieces of furniture, or other heavy goods online, whereas now, these types of online purchases can be viewed as commonplace.

“That has changed as people value their time and getting increasingly more comfortable buying things like that online,” he said. “People are not just buying books online anymore. This type of consumer activity is benefitting our business.”

Last-mile logistics is growing fast for two reasons, according to Jacobs. One reason is that retail chains are outsourcing a greater portion of their logistics operations to companies like XPO, as logistics is not part of retailers’ core competencies.

And the second reason is e-commerce growth, as it is not just bricks and mortar companies selling online, it is also small and medium-sized e-commerce companies that outsource 100 percent of their transportation and logistics operations.

XPO increases size of private offering: Last week, XPO announced it increased the size of the offering for its previously announced sale of 7.875 percent senior notes due 2019 from a principal amount of $350 million to $400 million.

XPO said it expects to receive gross proceeds from the offering of $416 million, which equates to a yield to maturity of 6.836 percent, stating that it plans to use the net proceeds “for general corporate purposes that may include future acquisitions.”

Following upping the size of the offering to $400 million, Jacobs said XPO now has more than $1 billion in cash, with roughly $1.5 billion in total available capital.

“This will be used primarily to execute on our acquisition backlog,” said Jacobs. “It basically pre-funds all our acquisition activity.”