XPO Logistics

The Tour de France is brutal. Unforgiving. A 3,500 km blitz, lasting twenty three days, across a country with a topography so diverse the eyes go wide at the thought. It is also a logistical bun fight. Twenty odd teams, eight riders each, support staff, sponsors, thousands of journalists and lots and lots of hangers on. It’s a circus that rolls through the mountains and villages to the sound of cow bells. Since 1981 the official logistics partner of the Tour, has been XPO Logistics, which has operations in France, but is headquartered in Connecticut, New Jersey and is listed on the NYSE. XPO is run by Brad Jacobs; look him up. Jacobs is a ‘doer’. Over the course of his career he has done near on 500 deals. He founded an oil brokerage business, and then an oil trading company. He then began consolidating small garbage collectors, under the banner of United Waste, which he then sold to Waste Management. Next up he formed United Rentals, which now has a market cap north of $13bn. Now, XPO Logistics; another roll up. This time in the sweet spot of logistics. He bought into XPO in 2011 when it had $177m in revenue and a $100m market cap. Today, it pulls in $16bn in revenue and sports a $7bn market cap. Back in January, which seems a long time ago, he was in a stew as the market was pricing his stock all wrong. It traded at half the earnings multiples of many peers. So he said he was going to do something about it, to sell off assets and realise that value. Then COVID hit. The interesting angle with XPO is that, there are two scenarios. Either Jacobs breaks it all up and he creates value. Or nothing happens and organic free cash flow muscles the leverage lower, volumes pick up as the economy heals and technology drives margins, and profits, higher. XPO is a tech leader in transportation, pumping half a billion dollars into software development, automation and tech hardware. The company employs more than a hundred data scientists who are busy building algorithms for pricing, load and route optimisation. The company has already implemented a number of advanced robotic solutions. Machine learning is employed to improve network productivity. At a Jefferies conference earlier this month the head of strategy Matt Fassler laid it on the table: “Our goal is to create shareholder value”. Loud and clear. His boss has the form and, with an 18% stake, the incentive to suggest they might just do that.