UPS ( CCJ Top 250, No. 1) is selling its LTL and truckload business, UPS Freight, to TFI International (No. 8) for $800 million, the companies announced Monday morning. The completion of the deal is expected in the second quarter of 2021 and is subject to working capital and other adjustments.
The decision to sell UPS Freight was reached following an evaluation of the UPS portfolio and aligns with the company’s “better not bigger” strategic positioning, UPS said in a press release. The company will still operate more than 27,000 tractor-trailers as part of its parcel delivery service, which it still retains, along with its freight brokerage (Coyote Logistics), its cargo airline and more.
“We’re excited about the future and the opportunities this creates for both UPS and UPS Freight as part of TFI International Inc.,” said UPS CEO Carol Tomé. “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.”
Approximately 90% of the acquired business will operate independently within TFI International’s LTL business segment under its new name, “TForce Freight,” while acquired dedicated truckload assets will join TFI’s truckload business segment, TFI said.
UPS and TFI will also enter into an agreement for UPS Freight to continue to utilize UPS’ domestic package network to fulfill shipment for five years.
“We are pleased to announce this highly strategic transaction that will strengthen our service offerings to customers as well as our ongoing relationship with UPS,” said Alain Bédard, Chairman, president and chief executive officer of TFI International. “Our strategy of operating independent business units with a high degree of accountability is well-suited for building on UPS Freight’s strengths and improving margins over time. TForce Freight will continue to serve UPS’ ongoing LTL distribution needs, and UPS will continue to provide freight volumes and other services to TForce Freight after the transaction for a base term of five years. We also look forward to offering expanded strategic network opportunities to UPS in Canada."
UPS Freight generated approximately $3 billion in revenue in 2020 and was approximately breakeven from an operating income perspective. TFI says it expects to realize significant near- and long-term opportunities to improve TForce Freight’s operating margin.