UPS announced recently that they’ve entered into an agreement to sell UPS Freight (UPSF) to TFI International (NYSE and TSX: TFII) for $800 million in a deal that’s expected to close during the second quarter of 2021.
In a press release, UPS Chief Executive Officer Carol Tomé commented that “The agreement allows UPS to be even more laser-focused on the core parts of our business that drive the greatest value for our customers.”
Since we know there will be a lot of questions about this deal, here are a few answers.
UPS Freight Transition FAQ
Why is UPS selling UPS Freight?
UPS has emphasized that this move is in line with their overall approach of “better, not bigger” and will allow them to focus on their core business. In a presentation outlining this divestiture, UPS gave three main financial reasons for the sale of UPS Freight to TFI International.
- They expect it to improve their operating margin and return on invested capital.
- It eliminates the need for future costly capital expenditures to maintain UPS Freight.
- The sale enables them to pay down long-term debt.
They also mentioned that it will not impact customers, although it is yet to be seen if the transition will be seamless, and hard to estimate how the terms offered by TFI in five years will impact customers versus maintaining a relationship with UPS Freight.
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. The company reported $5.2 in annual revenue in 2019. Their head offices are located in Saint-Laurent, QC, and executive offices are located in Etobicoke, ON. TFI has said that this acquisition will create North America’s most comprehensive LTL network. The company has long been building its business through acquisition and has added 88 companies since 2008, including the acquisition of CFI from XPO in 2016 for $558 million.
How long will I be able to book shipments with UPS Freight?
Under a five year agreement, UPS has commented that it will continue to provide LTL services for customers using their domestic package network. TFI International President and CEO Alain Bédard has stated that TForce Freight will serve the ongoing LTL distribution needs of UPS, and UPS will continue to provide freight volumes for the five years after the agreement closes.
How large is UPS Freight right now?
UPS Freight has roughly 14,500 employees (80% full time) and 197 facilities (147 owned) with 6,340 tractors and 23,400 trailers. In 2020, UPS Freight brought in over $3 billion in revenue, ranking in the top 10 of the $46 billion LTL sector. They currently operate in all 50 states, Canada, Puerto Rico, Guam, the U.S. Virgin Islands and Mexico. Nothing has been indicated about any change in coverage areas following the transition.
What will TFI International acquire from UPS Freight?
Approximately 90% of this transaction is the sale of UPS' LTL business which will be branded as TForce Freight within TFI International, and the other 10% is their truckload business, which will be absorbed within TFI's truckload segment.
What will happen to the employees of UPS Freight?
The roughly 14,500 employees of UPS Freight will move over to TFI International. UPS has stated that they will retain historical pension assets and liabilities, but pension benefits earned after the transfer will be the responsibility of TFI. Currently there are about 11,500 UPS Freight employees covered by collective bargaining agreements.
Where can I find more information?
To learn more about what's happening with the sale of UPS Freight, take a look at their press release about this divestiture or refer to their presentation.
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