RXO acquires Coyote Logistics from UPS for $1.025 Billion in Cash

RXO acquires Coyote Logistics from UPS for $1.025 Billion in Cash.

If you've been following the Carol Tomé's tenure at UPS this should come as no surprise. Let me explain.

UPS acquired Coyote Logistics in 2015 for $1.8 Billion. The goal was to leverage Coyote's FTL carrier capacity and state-of-the-art TMS BAZOOKA to expand UPS's footprint in FTL.

In 2020 Carol Tomé took over as CEO of UPS. It's important to note that Tomé was not an executive at UPS when the purchase of Coyote took place.

Rather than trying to play in all aspects of freight including, LTL, FTL, asset-based carriers, etc, Tomé wanted to focus on consolidating UPS to what they do best; Parcel Delivery.

In January of 2021, UPS sold its Canadian UPS Freight business for $800 million to TFI.

And now here we are. June of 2024 Coyote has sold for $800 million less than what it was purchased for back in 2015.

It should come as no surprise that Coyote was going to sell. If you ever listened to a UPS earnings call or an interview on Mad Money, all Tomé talked about was consolidation. She wants UPS to focus all its resources on being the best parcel delivery company in the world. Coyote did not serve that purpose.

There was less pride attached to the Coyote purchase with Tomé because she was not the one who made it.

This sale can be viewed a lot like the Khalil Mack Bears trade.

Let's look at the Chicago Bears as UPS and Khalil Mack as Coyote, Ryan Poles as Carol Tomé, and RXO as Los Angeles Chargers.

The Bears traded 2 first-round picks, a 3rd round pick, and 6th round pick for Mack in 2018. UPS paid $1.8 billion for Coyote

A new General Manager, Ryan Poles (Tomé), took over in 2022. He did not make the trade for Mack and he did not see a future in which Mack fit his plan. He viewed Mack as expensive whereas that money could be spent elsewhere.

Poles traded Mack for a 2nd-round pick and 6th-round pick to the Chargers, significantly less than what he was acquired for.

RXO may have gotten a steal. Coyote's TMS BAZOOKA is known as one of the best in the industry and Coyote has a deep customer and carrier network.

Tome was quoted about the sale of Coyote, “As UPS positions itself to become the premium small package provider and logistics partner in the world, the decision to sell our Coyote Logistics business allows an even greater focus on our core business,”