XPO's Jacobs Set to Spend `Several Billion Dollars' on Deals

  • Logistics CEO talks with targets after two-year buying hiatus
  • Focus is on supply-chain companies in North America, Europe

Bradley Jacobs Photographer: Christopher Goodney/Bloomberg

XPO Logistics Inc.’s chief executive officer is on the hunt for takeover targets again after taking a two-year pause to digest the nearly $5 billion purchases of two trucking companies in 2015. 

XPO could pay “several billion dollars” for an acquisition and is engaging with potential targets, said Bradley Jacobs. He’s keen on companies that provide supply-chain and warehouse services in North America and Europe. 

The serial entrepreneur, who has started and sold four businesses including United Rentals Inc. and United Waste Systems Inc., said he also is looking at less-than-truckload carriers in Western European countries where XPO doesn’t have a large presence.

“We’re going to start doing acquisitions again later this year or early next year in all likelihood,” Jacobs, 60, said in an interview at Bloomberg’s headquarters in New York Tuesday. “It will take a while to build up the pipeline and get things going.”

Jacobs has notched more than 500 acquisitions over his career of starting companies and building them out. With a $150 million investment in the forerunner to XPO in June 2011, Jacobs became majority shareholder of the logistics company and took over as CEO. XPO now has about $15 billion of annual sales and a market value of $6.8 billion.

Rough Patch

It hasn’t all been smooth. Investors balked at purchases of Con-way Inc. for $2.7 billion and French trucking company Norbert Dentressangle for $2 billion in 2015 excluding debt. That transformed XPO from a so-called asset-light model of not owning trucks directly. XPO’s shares tumbled to about $20 from a peak of more than $50 that year.

But XPO quickly met profit targets through cost cuts and expanding sales, especially in fast-growing areas such as e-commerce services. Its shares surged 41 percent this year through Tuesday, while the Bloomberg Americas Transportation Index has climbed 10 percent. The stock jumped 4.3 percent to $63.45 at 10:44 a.m. Wednesday in New York.

A large purchase could add as much as $500 million of earning before interest, taxes, depreciation and amortization, he said. XPO has good relations with sovereign-wealth and pension funds that are willing to provide financing, he said. 

“Size is not a restricting factor in terms of acquisition,” he said. “Financing a deal of any size -- small, medium or large -- is relatively easy.”

The company would be willing to increase debt temporarily to as much as 5.5 times Ebitda to fund a purchase, as it has with past deals, while committing to reduce the multiple to maintain its credit rating, Jacobs said. The debt-to-Ebitda ratio currently is hovering above 3 times, he said. Moody’s Investors Service has a long-term rating of B1 and a stable outlook on XPO.

Jacobs would like to expand into Asia, but targets are few and when companies come up for sale their prices tend to get bid up. XPO may seek out a joint venture partner in the region, he said.

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