United Parcel Service, the largest trucking company in the nation, is about to get a lot smaller. It is selling its less-than-truckload and truckload business, UPS Freight, to TFI International to the tune of $800 million.
Background of UPS Freight
This is not the first time the subsidiary changed hands. In 2005, UPS purchased the Overnite Transportation Company from Union Pacific Corporation for $1.25 billion. This company was rebranded into UPS Freight.
At an $800 million price tag, UPS Freight is being sold for a loss so that UPS can better focus on its last-mile delivery service, which has become more profitable than ever due to the coronavirus pandemic. Amazon has announced its intentions to start its own logistics network rather than relying on UPS, so UPS will be filling the delivery needs of smaller businesses, ranging from well-established store brands to small internet sellers.
Background of TFI International
While not as well-known in the United States as the United Parcel Service, TFI International is the owner of the largest trucking fleet in Canada. They own dozens of subsidiaries, including:
- Dynamex: a last-mile courier not unlike UPS’ primary operations.
- Highland: a delivery company specializing in ocean containers delivering from the eastern coast of Canada and the United States.
- Rebel Transport: transportation of heavy machinery used in oil and construction industries.
- Stream Logistics: specializes in what it calls “High Stakes Freight”, items that are both fragile and expensive, such as computer servers and custom-made windows.
The purchase of UPS Freight, which will be renamed once again into TForce Freight, further expands TFI International’s portfolio of business. TFI International believes that it can run a tighter business to better realize the $3 billion in annual revenue that UPS Freight brings in annually.
Conclusion
Both UPS and TFI International believe they benefited from this transaction in different ways. By focusing on final-mile delivery, UPS can realize a higher return-on-investment, and plans to use the $800 million obtained from the transaction to pay down long-term debt. By purchasing the LTL and truckload network, TFI International can expand its scope of business to cover more of North America. The deal is expected to finalize in the second quarter of this year.
