Combined package Service (NYSE:) announced Sunday that it will sell its Coyote Logistics business unit to RXO (RXO) for $1.025 billion.
RXO shares were up more than 14% in premarket trading Monday.
According to RXO’s statement, the transaction will be financed through a combination of equity and debt capital, including a $300 million equity investment from MFN Partners and a $250 million equity investment from Orbis Investments.
“The decision to sell our Coyote Logistics business allows us to further focus on our core business,” UPS CEO Carol Tom said in a statement.
Following the announcement, Morgan Stanley analysts reiterated a Buy rating on RXO shares in a note.
“We believe this transaction will be immediately accretive to RXO’s earnings. EBITDA and EPS, and the deal multiple of 12x to 2023 EBITDA synergies is viewed as very attractive given that we are at the bottom of the cycle,” the analysts said.
“We believe this transaction will significantly expand RXO’s reach and position PF RXO as the third-largest freight broker in North America,” they added.