United Parcel Service Inc. is in talks to buy Coyote Logistics
LLC, a provider of transportation and shipping services, according
to people familiar with the matter.
While no deal has been reached, UPS could pay $1.8 billion or
more for the company, according to one of the people familiar with
the talks. It isn't certain that the talks will result in a deal,
the people said.
If UPS does acquire Coyote Logistics, it would follow FedEx
Corp.'s $1.4 billion acquisition of third-party logistics provider
GENCO Distribution System Inc. earlier this year.
Bloomberg first reported news of the talks earlier
Wednesday.
It would also mean Coyote Logistics is abandoning an initial
public offering, which Wall Street Journal reported the company was
planning in March. It would be the latest private-equity backed
company to do so, and underscores the continuing appetite from
buyers for acquisitions to make them bigger and more efficient.
Private equity-backed companies have raised just $8.8 billion in
U.S. IPOs, roughly 40% of the $22.6 billion that they had raised by
this time last year, according to data provider Dealogic.
Private-equity firms often prefer to sell companies outright
instead of pursuing IPOs as they are able to fully exit from their
investment rather than selling stock over time.
Coyote is "one of the fastest-growing [third-party logistics
providers] in the country," said Evan Armstrong, president of the
research firm Armstrong & Associates.
U.S. domestic freight brokers, or third-party logistics
companies, grew 20% overall last year, and the business is expected
to reach nearly $200 billion in overall sales by 2018, according to
the firm.
"Shippers are looking for capacity and they are hiring these
guys," Mr. Armstrong said. "Trucking capacity has been hard to find
and if you don't have $300 million in annual transportation
spending you're not going to be able to garner the rates these guys
can."
UPS is scheduled to report second-quarter earnings on
Tuesday.
Paul Page contributed to this article
Write to Gillian Tan at gillian.tan@wsj.com and Laura Stevens at
laura.stevens@wsj.com
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