Check Call: Long live the tale of Coyote Logistics

Coyote Logistics has had an interesting life span. Founded in 2006 by Jeff Silver, the company started out small and quickly became one of the top freight brokerages in the U.S. Fast forward to 2015 and UPS bought Coyote for a casual $1.8 billion. UPS and Coyote had always worked closely together before the acquisition as Coyote would take any excess full truckload shipments during peak shipping seasons.

Fast forward again to present day. UPS wanted to sell Coyote and found a willing buyer in the form of RXO, the freight brokerage spinoff of XPO. This sale is expected to be for $1.025 billion, which for those following along at home is just about $775 million less than what UPS purchased it for. The deal is expected to close before the end of this year.

These changes come as UPS has made a shift to focus almost exclusively on small package freight and cut the proverbial excess fat that is weighing down the balance sheet.

As for the reception of this sale announcement? Couldn’t be better. Wall Street is thrilled. RXO’s stock price jumped up by double-digit percentages, and RXO is now looking to be the third-largest brokerage in the U.S.

In John Kingston’s article, Jason Seidl of TD Cowen said RXO had acquired Coyote for a ‘reasonable price’ of roughly nine times projected earnings before income, taxes, depreciation and amortization in 2025. The $1.025 billion price tag was approximately 12 times Coyote EBITDA of $86 million in 2023.

The combined company will have a more diversified book of business as well, spanning everything from food and beverage, a Coyote strong suit, all the way to retail and industrial/manufacturing, an RXO speciality.

RXO has been the outlier in the space in regard to profitability and success. It has continually been a top performer compared to other large brokerages. Most recently Q1 earnings were overall down from a year-over-year perspective but are seeing major improvements in gross margin and revenue per load.

RXO has been the one to beat for a while, but this move cements it as a top dog. It will remain a favorite past-time to see how the company navigates the acquisition through a less-than-desirable freight market.

TRAC Tuesday. This week’s TRAC lane goes from Chicago out east to Allentown, Pennsylvania. The rates for this load have steadily increased over the past month. Now an all-in rate of $1,838 before margin should get the load secured with little issue. Outbound tender rejections in Chicago have started falling ever so slightly from the midmonth high of 2.38% on June 18. Currently the Outbound Tender Reject Index is sitting at 2.18%, a meager 31-basis-point drop week over week.

Allentown has taken the opposite approach. Outbound tender rejections have hit a high that hasn’t been seen since early January. The OTRI is at 3.84%, a 65-basis-point increase w/w. Both markets have rejection rates well under the national average of 5.43%. As summer officially gets underway, rates will continue to creep up in various markets as some seasonal volumes come into play.

Who’s with whom, or in this case who’s not around anymore. That would be the Humble Texas-based company U.S. Logistics Solutions. Employees of USLS were notified Thursday afternoon via calls and texts that the company was closing and there would not be paychecks to finish out the week. USLS was formerly Forward Air Solutions.

From Clarissa Hawes article: “Eric Culberson, former president of USLS, confirmed the closure in a LinkedIn post on Saturday, stating that thousands of workers were without jobs after the company’s owner, private equity firm Ten Oaks Group, headquartered in Charlotte, North Carolina, shuttered operations.”

USLS was Ten Oaks Group’s first transportation acquisition, and it looks like it ended up not quite working out for the equity group. It’s not known what is happening to the other 17 holdings the company has listed on its website.

On a side note, for anyone looking for qualified candidates for a team, might I recommend someone from USLS?