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Moody’s says XPO could have ‘possible downgrade’ after Con-way deal announced
Following XPO Logistics' and Con-way Inc.'s announcement September 9 that they have entered into a definitive agreement for XPO Logistics to acquire Con-way in a $3 billion deal Moody's Investors Service placed its ratings for XPO Inc. "under review for possible downgrade ... ."
The announcement to acquire Con-way "marks XPO's second multi-billion-dollar deal this year, following its $3.5 billion purchase of European transport and logistics company Norbert Dentressangle back in April," said Chris Wimmer, senior credit officer and Moody's lead analyst for XPO. He added that " ... the sheer pace and magnitude of recent acquisitions" could "permanently strain its balance sheet with an excessive debt burden for the assigned rating category."
The transaction is expected to be substantially accretive to XPO's earnings in the first 12 months.
XPO intends to raise its year-end 2015 target run rates for revenue and EBITDA, and issue new long-term targets, upon completion of the acquisition.
Under the terms of the agreement, XPO would launch a tender offer for all of Con-way's outstanding shares at a cash price of $47.60 per share.
Following the tender offer, if successful, Con-way would merge with a subsidiary of XPO, becoming a wholly owned subsidiary of XPO, and all remaining outstanding shares of Con-way would receive the same consideration paid to stockholders who participated in the tender offer.
The companies said the deal is valued at $2.72 billion, or $3 billion including $290 million in debt.
All of the acquired operations — Con-way Freight, Menlo Logistics, Con-way Truckload and Con-way Multimodal — would be rebranded as XPO Logistics.
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