XPO buys Conway

For those still following XPO, they purchased ConWay Freight for 30%+ over market value. The market doesn’t appear to like the deal as XPO is down about 11% as I write this.

Would be interested to hear any thoughts.


AJ, when the Monday crash occurred a few weeks back, I had to raise cash to scoop up bargains, and XPO is one of the things I sold (along with my CRTO). So I haven’t really paid any attention to them since, but I did go read the press release when I saw your post.

XPO’s whole strategy is to roll up these companies, so that’s what should be expected. I don’t know anything about ConWay specifically, but from the press release it sounds like this moves XPO further into LTL (less than truckload) shipping which Jacobs describes as “a non-commoditized, high-value-add business that’s used by nearly all of our customers.” Jacobs has said before that customers want to simplify their transportation and logistics dealings, so the more XPO can provide (in terms of services and geographical reach) the more attractive they look. They also are undoubtedly getting a lot of data, which is also important, and can perhaps be leveraged in other parts of the organization.

I sounds like ConWay also owns some trucks. XPO is an asset-light business, meaning they tend not to own the trucks (in North America – Europe is a different story, as Norbert owned its fleets). But when things start to boom and everyone needs a truck, being asset-light can be a disadvantage: you’re competing for the same trucks as everyone else, and companies that own their trucks can use that as a bargaining chip for large customers (guaranteeing them capacity). So this could potentially help XPO with some larger companies, which I think is what Jacobs is getting at when he says “importantly, we’ll gain strategic ownership of assets that will benefit our company and our customers during periods of tight capacity.”

And of course they’re also probably getting access to new customers, which they can begin cross-selling to. They specifically call this out:

“Another crown jewel in this transaction is Con-way’s subsidiary, Menlo Logistics, an asset-light top 30 global contract logistics provider with additional lines of business in freight brokerage and managed transportation. Menlo serves blue chip contract logistics customers in verticals such as high tech, healthcare and retail, which complement the verticals we serve at XPO.”

When XPO acquired Norbert, they also made a big deal of the blue-chip customers. It’s quite possible there’s some overlap with Norbert’s customers, and they now find themselves being served by XPO to some extent in two continents – perhaps warranting a deeper look at what else XPO can do for them. And there’s potential cross-selling for the rest, of course.

And he also mentions that the acquisition “will strengthen XPO’s position in the highly desirable e-commerce sector, which is projected to grow at a pace of 18% to 21% annually.” And it also increases their cross-border Mexico services.

Finally, it also sounds like they think ConWay could be better run, and XPO believes it will be able to substantially improve its performance. The ConWay CEO is stepping down.

Anyway, I don’t know enough about it to speculate about what the market likes or doesn’t like. Ultimately, an investment in XPO is an investment in Jacobs’ ability to roll up the industry at a rational price (and to be clear, he’s always said middle of the price curve – so not cheap, but not expensive) and integrate those acquisitions into something greater than the sum of the parts. It seems hard to judge the long-term prospects of the company by the announcement of any particular deal they’ve made, but maybe that’s just me.

It’s all just my 2 cents, of course.



For those still following XPO, they purchased ConWay Freight for 30%+ over market value. The market doesn’t appear to like the deal as XPO is down about 11% as I write this. Would be interested to hear any thoughts.

Hi AJ, As I wrote some time back, I bought XPO some time back as a great story stock, with all the success Jacobs had in the past. After they bought Norbert some months back, I felt that they were now big enough that they would start getting valued as a real company (you know, with earnings, PE ratios, cash flow, that sort of thing) and going along losing money wasn’t going to keep cutting it. They had been as high as $50.50 and I sold a little later at $48.00. I guess I was correct as they are now at $29.75. (That’s the same thing that happened to the 3D printing stocks, WPRT, and all the rest. People started asking “Where’s the profits?” (for those who like old slang: Where’s the bacon?))



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I have invested in a number of companies that do roll ups in highly fragmented industries. For a variety of reasons, most all of them have turned out poorly as an investment. I avoid this type of investment now.