XPO Logistics to Acquire New Breed Logistics and Completes Acquisition of Atlantic Central Logistics - Seite 2

Compelling Strategic Rationale for New Breed Acquisition
             

• XPO will gain entry into the most desirable sector of contract logistics: customized services with solid margins, high contractual revenue renewal rates and low cyclicality. New Breed's revenue renewal rate for the past three years has been approximately 99%.
   
• New Breed's non-asset based business model generates a high return on capital and strong free cash flow conversion. Capital expenditures for 2013 were 4.2% of revenue and largely devoted to developing proprietary information technology. For the full year 2013, New Breed's return on invested capital was approximately 38% and free cash flow conversion was approximately 71%.^[1]
   

The acquisition is consistent with XPO's strategy of building a broad and integrated logistics offering by acquiring leading positions in sectors where it expects sustained demand for its services. For the past 10 years, New Breed has increased revenue at a compound annual growth rate of 16%, and realized a compound annual growth rate of 19% on adjusted EBITDA. New Breed's growth is being driven by its focus on attractive customer verticals, namely technology, telecom, e-commerce, aerospace and defense, medical equipment and manufacturing.
 

The capabilities of both companies are complementary, and the combination is expected to create significant cross-selling opportunities. New Breed's customers are candidates for the truck brokerage, intermodal, expedite, last mile and freight forwarding services XPO offers, as are the tens of thousands of vendors that move freight in and out of New Breed facilities. In addition, many of XPO's strategic accounts utilize the kind of high-quality, customized solutions New Breed offers.
 

Both XPO and New Breed have an intense commitment to cutting edge technology. The combination will double XPO's IT workforce to approximately 600 talented, forward-thinking IT professionals innovating new ways to serve customers.
 

XPO expects to integrate its XPO NLM expedited freight management platform with New Breed's transportation management system to offer customers highly engineered managed transportation solutions. New Breed's applications use complex modeling tools to deliver dynamic freight optimization, routing guide management, and carrier selection based on cost, service requirements, performance metrics and transit times.

[1] Free cash flow conversion equals EBITDA minus capex, divided by EBITDA. Return on invested capital equals ongoing operations EBIT divided by the sum of net working capital and net PP&E.