UPS announced Friday that it will acquire Chicago-based Coyote Logistics for $1.8 billion.
The move gives UPS new service offerings in the freight brokerage business at a time when the company has been struggling to maintain its profitability and reduce its costs in package delivery.
Coyote Logistics’ technology that allows customers to book and sell empty space on existing truck runs has long been something UPS and other companies have coveted. According to UPS Chief Commercial Officer Alan Gershenhorn, UPS has about 7 million empty trip legs per year, so filling some of that space will add to the company’s bottom line.
Gives UPS More Flexibility
Coyote acts as a kind of travel agent for freight that doesn’t own its own trucks. UPS already has its own extensive fleet of trucks but is expected to benefit from Coyote’s technology.
Coyote will continue to operate as a separate entity under the leadership of current CEO Jeff Silver. Coyote’s employees and systems are expected to remain intact, according to a UPS news release.
UPS CEO David Abney said the purchase made perfect sense for UPS given its current challenges.
“The brokered full-truckload freight segment is a high growth market and we expect it will continue to outpace other transportation segments,” Abney said. “This high-quality acquisition significantly increases UPS full-truckload scale and we are uniquely position to take advantage of exciting new growth and synergy opportunities.”
Tap into Coyote’s Network
Coyote arranges customers’ freight shipments on available trucking capacity contracted to members of its impressive carrier network, which includes more than 35,000 smaller trucking companies. The company has experienced very rapid revenue growth since it was founded and has strong market positions the in food and beverage, consumer goods, paper and packaging, industrial, and retail segments.
The company uses a suite of proprietary IT systems that provide market-leading transportation management applications, as well as several software apps that allow for easy integration between customers and transportation providers.
Second Big Coyote Move in a Year
UPS’s purchase of Coyote comes a little more than year Coyote merged with Access America Transport, which is based in Chattanooga, Tennessee, to create one of the nation’s largest third-party logistics carriers.
Coyote, which posted earnings of $559 million in 2011, specializes in the brokerage of truck freight logistics and services a variety of customer bases, from food and beverage to heavy industry. The company was founded in 2006.
Access America Transport brought multi-modal transportation services, including trucking, less-than-truckload, intermodal, flatbed and specialized freight for shippers and carriers nationwide. The company was founded in 2002.
Becomes One of the Largest 3PL Providers
Combined, the two companies became one of the largest third-party service providers on the North American continent, with run rate revenues exceeding $2 billion. It has 17 North America locations, about 40,000 contracted carriers, and about 1,750 employees.