RXO Logistics: Using Market Sentiment to Fund M&A

How RXO used shareholder backing and a rising stock price to acquire Coyote Logistics with equity instead of debt.

The Setup

RXO was spun out of XPO in November 2022 as the fourth-largest freight broker with 4% market share and $356 million in debt. A 2023 freight recession hit revenues 18% and EBITDA 56%. The stock sank to $17.

The Opportunity

UPS announced strategic alternatives for Coyote Logistics, admitting its expansion into freight brokerage didn’t fully contemplate the earnings volatility. RXO announced the acquisition for $1.025 billion—$800 million less than UPS paid.

The Financing Alchemy

Rather than the stock declining on the announcement, it rose 25%. RXO raised $550 million in a private placement from its top shareholders, then later a $550 million marketed equity offering at only a 4.5% discount. It financed the entire acquisition without additional debt.

The Update

Despite the rosy picture, RXO guided to weak Q1 2025 results, sending shares back to pre-announcement levels. Synergy targets were raised from $25M to $50M. How this looks long-term depends entirely on whether the freight market recovers.