ATLANTA: UPS, which reported a second quarter net profit of US$1.2 billion on revenue of US$14 billion on July 28, is to buy Chicago-based truckload broker Coyote Logistics for US$1.8 billion.
Founded in 2006, Coyote arranges U.S. truckload and less-than-truckload shipments for the food and beverage, consumer goods, paper, packaging, industrial and retail segments. Last year the company reported revenue of US$2.1 billion.
UPS said the acquisition complements its supply chain and freight services that reported a 4.5 percent drop in Q2 revenue to US$2.2 billion.
"The brokered full-truckload freight segment is a high growth market and we expect it will continue to outpace other transportation segments," said UPS CEO David Abney. "This high quality acquisition significantly increases UPS full-truckload scale and we are uniquely positioned to take advantage of exciting new revenue growth and synergy opportunities."
UPS said it had considerable synergy with Coyote including the addition of 35,000 carriers and 12,000 customers; an innovative ability to optimize networks and enable back-haul solutions; proprietary IT systems; a very experienced management team that will remain in place; and an asset-light, technology-driven business model.
"In addition to the core profitability of Coyote, UPS is well positioned to realize a run-rate of US$100 to US$150 million of annual operating synergies, from backhaul utilization, purchased transportation and cross-selling opportunities," added Abney.
Acknowledging that Coyote "possesses significant industry knowledge, intellectual property, employee talent, and has a strong company culture", UPS said the company would continue to operate as a subsidiary with the current management team that includes CEO Jeff Silver and COO Jim Sharman.
Commenting on the sale, Silver said: "The Coyote management team is very excited to become a part of UPS and continue to grow, now with UPS's support. Our great people, leading technology and flexible organization will enable us to scale quickly to take full advantage of the added customers, lanes and capacity within UPS. It's a great day for Coyote employees, our customers and our contracted carriers."