TFI International Acquisition of UPS Freight Raises Questions
Jan 27, 2021
There’s rarely a dull moment in the logistics industry these days, and this week is no exception with the breaking news of the UPS Freight divestiture on Monday. Subsequent to the announcement of this $800 million acquisition by TFI International, we received several calls and emails from customers, shippers and members of the press who had questions about how this transaction will affect LTL shippers.
For the most part, people have been seeking the answers to three questions:
1. Who is TFI International?
TFI International is a large Canadian transportation and logistics provider serving North America with offerings in truckload, LTL, parcel, and logistics markets. Their more commonly known brands are Vitran and CFI, which was acquired from XPO in 2016. Their last reported revenue was $5.2 billion in 2019 and the acquisition will add about another $3 billion in annual revenue to their portfolio. The company is no stranger to acquisitions and has added 88 companies since 2008.
2. Why is UPS Freight being sold?
The main motives that UPS has given for the sale are to improve their focus and finances. And when you check out UPS’ Presentation and see margins of 1% - 2%, you can understand that under UPS’ “Better Not Bigger” earnings approach, they can invest their resources on their core parcel business, and other business areas that will yield better returns for their shareholders. On the finance side, it will help them to improve their operating margins and ROIC.
3. What does this mean for shippers?
In light of the commercial agreement that has been negotiated between UPS and TFI, it appears that both companies are communicating that it’ll be business as usual for shippers as both companies look to minimize any potential disruptions. UPS and TFI plan to enter an agreement in which UPS Freight will continue to utilize UPS’ domestic package network to fulfill shipments for another five years.