Did Ups Sell Off Ups Freight?

UPS (United Parcel Service) is a global leader in logistics, offering a broad range of solutions including the transportation of packages and freight. Founded in 1907, UPS has grown into one of the world’s largest package delivery companies.[1]

UPS Freight, originally known as Overnite Transportation, was acquired by UPS in 2005 and rebranded as UPS Freight in 2006. UPS Freight offered less-than-truckload (LTL) shipping services across North America. With a history going back over 85 years, UPS Freight became one of the largest LTL carriers in the United States under UPS ownership.[2]

UPS Freight Overview

UPS Freight is a less-than-truckload (LTL) shipping carrier and subsidiary of UPS. It provides regional, inter-regional and nationwide LTL freight services across the United States, Canada, Puerto Rico, Guam, Mexico and international shipping to and from over 140 countries worldwide [1].

UPS Freight offers a variety of LTL shipping solutions for businesses, including guaranteed, expedited, air freight, trade show, and hazardous materials shipping. It has over 150 operational facilities and more than 14,000 employees in the US. UPS Freight serves all 50 states, Canada, Mexico, Puerto Rico and Guam [2].

Customers can get LTL freight quotes, schedule pickups, track shipments and manage accounts online through the UPS website and mobile app. UPS Freight coordinates freight shipping and delivery with UPS’s small package operations and supply chain solutions divisions [3].

Reasons for Potential Sale

UPS had acquired Overnite Transportation in 2005 for $1.25 billion and rebranded it as UPS Freight in 2007 to expand into the less-than-truckload (LTL) shipping market (1). However, UPS Freight faced financial challenges as the LTL market became increasingly competitive and required heavy investment in technology, infrastructure, and sales teams (2). UPS Freight had narrow profit margins and lower revenues compared to UPS’ core package delivery operations.

In recent years, UPS shifted its business strategy to focus more on small package delivery and healthcare logistics, deciding to divest UPS Freight as a non-core business unit (3). The sale enabled UPS to streamline operations, pay down debt, and invest in more profitable areas aligned with its long-term vision.

Sale Announcement and Details

In January 2021, officials from UPS and TFI International Inc. announced an agreement for TFI to purchase UPS Freight for $800 million. According to the press release from UPS, the company made the strategic decision to sell UPS Freight as part of its focus on the core package and air freight businesses. The sale to TFI International, a Canada-based trucking and logistics company, would allow UPS Freight to operate under new ownership. TFI cited UPS Freight’s extensive network and similar culture as strategic advantages of the acquisition.

The sale price of $800 million reflected an enterprise value of UPS Freight and included its assets and real estate. According to UPS, the deal was subject to regulatory approvals and expected to close within 90 days. Both companies emphasized the transaction would allow UPS Freight to benefit from TFI’s transportation and logistics capabilities as part of a larger, dedicated LTL business.

Impact on UPS Freight Operations

The sale of UPS Freight to TFI International is expected to bring some changes to the UPS Freight business, though the operations are expected to continue largely unchanged in the short-term.

TFI has said they plan to operate UPS Freight as a standalone business unit under the new name TForce Freight (1). The existing UPS Freight management team will remain in place during an interim period to ensure continuity. Over time, some consolidation of operations and staff is possible as TFI looks to optimize the business.

In terms of services, UPS Freight will continue operating its less-than-truckload network across North America. Customers can expect the same portfolio of LTL, truckload, intermodal and specialized services. The UPS brand name will no longer be used, but the expectation is for consistent, reliable service under the new TForce Freight brand (2).

The unionized UPS Freight workforce is anticipated to remain in place, with minimal labor disruption from the sale. TFI has experience working constructively with labor unions in its other operations (3).

(1) https://about.ups.com/us/en/newsroom/press-releases/our-strategy/ups-announces-agreement-to-sell-ups-freight-to-tfi-international.html

(2) https://transimpact.com/nextsights/why-the-ups-sale-of-its-freight-division-signals-opportunity-for-small-parcel-shippers/

(3) https://www.freightwaves.com/news/ups-to-sell-ups-freight-after-a-tough-15-year-run

Impact on UPS Business

The sale of UPS Freight is expected to allow UPS to focus more on its core small package delivery operations. UPS had acquired Overnite Transportation, the predecessor to UPS Freight, back in 2005 but had struggled to integrate the less-than-truckload business. As noted in a FreightWaves article, UPS Freight had underperformed financially, operating at breakeven at best. Selling the business allows UPS to channel more resources into strengthening its core competencies.

Financially, UPS will gain $800 million in proceeds from the sale while also removing the drag on earnings from UPS Freight. UPS announced the transaction will be accretive to UPS’s consolidated results in 2022. Strategically, this refocuses UPS on small package delivery and related supply chain solutions which aligns with e-commerce growth trends.

The sale enables UPS to double down on its strengths in small parcel delivery networks and technology. As UPS CEO Carol Tomé stated in the company’s press release, “This transaction will allow UPS to be even more laser-focused on our most significant growth opportunities…”

Customer and Industry Reaction

The sale of UPS Freight to TFI International has elicited some notable reactions from shippers, analysts, and competitors in the industry.

Many major shippers that relied on UPS Freight expressed concerns over the change in ownership and operations. Shippers worried about potential service disruptions and impact on transit times during the transition period (1). However, some shippers welcomed the renewed focus on small parcel from UPS.

Industry analysts saw the sale as a way for UPS to focus on its core small parcel business, where it holds a dominant market position (2). The move was characterized as UPS admitting that the UPS Freight unit failed to meet growth and profitability targets over its 15 year ownership. UPS Freight was not able to gain significant market share against larger, more established LTL carriers (3).

Competitors like FedEx, Old Dominion, and Saia may benefit from UPS’ exit from the less-than-truckload segment. This opens opportunities for competitors to capture a portion of UPS Freight’s $6 billion in annual revenue. However, the companies will need to wait 12 months before directly soliciting UPS Freight’s customers due to a non-compete clause.

Transition Timeline

The sale of UPS Freight to TFI International occurred in stages over 2021, with key dates including:

January 25, 2021 – UPS announced an agreement to sell UPS Freight to TFI International for $800 million. The deal was expected to close in the second quarter of 2021. (UPS Press Release)

April 29, 2021 – UPS confirmed the sale was completed and UPS Freight was now officially part of TFI International. TFI announced plans to rebrand UPS Freight as TForce Freight. (Transport Topics)

May 30, 2021 – The rebranding from UPS Freight to TForce Freight was completed. Customers began seeing the new TForce Freight name, logo and colors. (Forbes)

The transition aimed to be seamless for customers. TFI committed to maintaining operations and honoring existing UPS Freight contracts and rates. Key leadership stayed in place during an integration period.

Long-term Outlook

Under the new ownership of TFI International, UPS Freight is expected to have a bright future ahead. The company will benefit from being part of a larger transportation and logistics organization with expanded capabilities and resources. According to CEO Alain Bédard, TFI has plans to invest in and grow the UPS Freight business, modernizing operations and integrating it into the TFI network (UPS tempers 2023 revenue view as freight volumes decline).

While some organizational changes and adjustments will occur during the transition period, the core of UPS Freight’s operations and network are expected to remain intact. TFI is committed to serving existing UPS Freight customers and sees significant growth opportunities. The acquisition provides TFI entry into the less-than-truckload (LTL) market and expands its US operations. Overall, industry analysts expect UPS Freight to continue as a reliable, competitive LTL carrier under TFI ownership.

For UPS, the sale enables renewed focus on its core package delivery and logistics solutions. UPS can redirect capital to growing areas like healthcare, small & medium businesses, and international. While no longer owning UPS Freight, UPS maintains a strong relationship and business partnership going forward. The long-term outlook points towards a win-win for both companies and their customers.

Conclusion

In summary, UPS made the strategic decision in late 2022 to sell UPS Freight to finance and transportation company TFI International as part of a reorganization of its less-than-truckload services unit. The $800 million deal, set to close in early 2023, will effectively spin off UPS Freight as a separate business under new ownership. While UPS will retain a minority stake in the new entity, it allows UPS to focus on its core small package delivery operations. For customers and employees of UPS Freight, operations are expected to continue as normal during an integration period as the business transitions to TFI ownership over the next several years. The sale of UPS Freight marks the end of an era, though UPS states it will maintain a strong LTL network through arrangements with TFI International and other carriers. With the deal providing capital to invest in growing areas, UPS aims to adapt and strengthen its competitive position in the rapidly evolving transportation industry.