XPO to Acquire Pacer International January 6, 2014 Exhibit 99.2 |
2 Additional Information In connection with the Merger, XPO will file with the U.S. Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 that will include a Proxy Statement of Pacer and a Prospectus of XPO, as well as other relevant documents concerning the proposed transaction. XPO AND PACER SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT / PROSPECTUS REGARDING THE MERGER WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER, PACER AND XPO. Investors and shareholders may obtain copies of these documents (when they are available) and other documents filed with the SEC at the SEC’s web site at www.sec.gov. Investors and shareholders may also obtain, free of charge, copies of these documents filed with the SEC by XPO through the investor relations page on XPO’s corporate website at www.xpocorporate.com or by contacting XPO Logistics, Inc. at Five Greenwich Office Park, Greenwich, CT 06831, Attention: Investor Relations. In addition, investors and shareholders may also obtain, free of charge, copies of these documents filed with the SEC by Pacer through the investor relations page on Pacer’s corporate website at www.pacer.com or by contacting Pacer International, Inc. at 6805 Perimeter Drive , Dublin, OH 43016, Attention: Investor Relations. Participants in Solicitation XPO, Pacer and their respective executive officers and directors may be deemed to be participants in the solicitation of proxies from Pacer shareholders with respect to the proposed merger. Information about XPO’s executive officers and directors is available in XPO’s proxy statement on Schedule 14A for its 2013 annual meeting of shareholders, filed with the SEC on April 27, 2013. Information about (1) Pacer’s executive officers and directors is set forth in Pacer’s Annual Report on Form 10-K filed with the SEC on February 8, 2013 and (2) their ownership of the Pacer shares is set forth in Pacer’s proxy statement on Schedule 14A filed with the SEC on March 13, 2013. Investors and shareholders may obtain more detailed information regarding the direct and indirect interests of XPO, Pacer and their respective executive officers and directors in the proposed merger by reading the Proxy Statement/Prospectus regarding the merger when it becomes available. Copies of these documents may be obtained, free of charge, as described above. This document shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. Forward Looking Statements This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan," "potential," "predict," "should," "will," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target" or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include, but are not limited to, those discussed in XPO’s and Pacer’s filings with the SEC and the following: economic conditions generally; competition; XPO’s ability to find suitable acquisition candidates and execute its acquisition strategy; the expected impact of the acquisition of Pacer, including the expected impact on XPO’s results of operations; the ability to obtain the requisite regulatory approvals, Pacer shareholder approval and the satisfaction of other conditions to consummation of the transaction; the ability to realize anticipated synergies and cost savings; XPO’s ability to raise debt and equity capital; XPO’s ability to attract and retain key employees to execute its growth strategy, including retention of Pacer’s management team; litigation, including litigation related to misclassification of independent contractors; the ability to develop and implement a suitable information technology system; the ability to maintain positive relationships with XPO’s and Pacer’s networks of third-party transportation providers; the ability to retain XPO’s and Pacer's largest customers; XPO’s ability to successfully integrate Pacer and other acquired businesses; and governmental regulation. All forward-looking statements set forth in this document are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, XPO, Pacer or their respective businesses or operations. Forward-looking statements set forth in this document speak only as of the date hereof, and neither XPO nor Pacer undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events except to the extent required by law. |
3 One of the Largest 3PLs in North America We facilitate over 20,000 shipments per day 4th largest freight brokerage firm, and Top 50 logistics company Largest manager of expedited shipments #1 heavy goods, white glove provider of last-mile logistics International and domestic freight forwarder Growing presence in managed transportation and LTL Soon to be a top provider of intermodal services and a leader in cross-border Mexico intermodal Sources for rankings: Transport Topics and Journal of Commerce |
4 Clearly Defined Strategy for Value Creation Significantly scale up and optimize existing operations Acquire companies that bring value and are highly scalable Open cold-starts where sales recruitment can drive revenue We are on track or ahead of plan with all three legs of our growth strategy |
5 Planned Acquisition of Pacer International Compelling reasons for the transaction Intermodal is one of the fastest-growing areas of transportation logistics in North America Pacer (NASDAQ: PACR) is the third largest provider of intermodal services Pacer is the largest provider of intermodal services in the high- growth cross-border U.S.-Mexico marketplace The combination will create company-wide cross-selling opportunities in every area of XPO service Sources: Transport Topics and Pacer International company data |
6 A Strong Entry into Intermodal XPO will gain instant scale and expertise in intermodal Pacer manages approximately 10% of all domestic intermodal loads in North America Trailing 12 months revenue of approximately $1.0 billion through November 2013 Approximately 950 employees at 30 locations serving over 3,000 customers Will continue to be led by Dan Avramovich as CEO of the new XPO unit, with substantially all of Pacer’s executive team Sources: Pacer International company data |
7 Major Intermodal Market Opportunity $15 billion intermodal sector in North America One of the fastest-growing areas of transportation logistics – Growing at three to five times GDP Very attractive to shippers as a way to lower transportation costs for freight traveling 600 miles or more Pacer has built a strong intermodal presence over 16 years Sources: American Trucking Associations, FTR Associates and Pacer International company data – Rail is more fuel-efficient than truckload – Intermodal can lower shipper’s cost by up to 15% to 20% |
8 High-Growth Cross-border Mexico Sector Driven by increased near-shoring by manufacturers Mexico offers a highly attractive manufacturing environment – Competitively priced labor force – Faster speed-to-market than overseas locales – Can be more cost effective than cross-border truckload Large potential universe for conversion to intermodal: an estimated 2.8 million trucks move cross-border each year Pacer has industry-leading cross-border expertise Sources: AlixPartners and Pacer International company data |
9 Immediate Synergies of Service Offerings Combination will create company-wide cross-selling opportunities – XPO will sell intermodal to over 9,500 customers – Pacer’s intermodal customers will have access to XPO’s full range of services – Combined sales force will use strongest single point of contact for each customer relationship Will enhance XPO’s value proposition as a large, single-source logistics provider with deep capacity Source: XPO Logistics company data |
10 Details of the Pacer Transaction $335 million market value, cash and stock Purchase price of $9.00 per share: $6.00 in cash, and $3.00 in stock subject to a price collar Enterprise value of $296 million: approximately 11.3 times Pacer’s 2013 consensus EBITDA of $26.1 million, and 9.1 times 2014 consensus EBITDA of $32.6 million XPO has obtained committed transaction financing from Credit Suisse AG for up to $325 million in senior secured loan facilities Transaction expected to close in 2Q 2014 and be significantly and immediately accretive to XPO’s earnings – Will double XPO’s annual revenue run rate to $2 billion |
11 Acquisition Aligns with XPO’s Strategy XPO is committed to providing the services customers need most Will continue to acquire leading positions in the fastest-growing areas of logistics – Acquired 3PD and Optima in 2013: leaders in last-mile – Acquired NLM in 2013: leader in web-based managed transportation for expedite – Pacer will make XPO a major intermodal provider and the largest provider in the cross-border Mexico sector Pipeline still active for potential acquisitions |
12 Completed 10 strategic acquisitions and opened 23 cold-starts in two years Created leading edge recruiting and training programs Introduced scalable IT platform Established national operations centers in Atlanta, Charlotte and Chicago Raised $543 million in common stock and convertible debt offerings, and entered into a $125 million ABL facility Stratified customers, assigned a single point of contact to each Disciplined focus on operational excellence Precise Execution of Growth Plan |
13 Strong Industry Fundamentals Sources: American Trucking Association, Armstrong & Associates U.S. logistics is more than $1 trillion annual spend Over-the-road trucking is $350 billion Penetration rate estimated at 15% (approximately $50 billion) – 85% of shipments are not presently handled by brokers Brokers add efficiency to both shippers and carriers – Shippers gain access to thousands of carriers, carriers gain access to millions of loads Highly fragmented: more than 10,000 licensed brokers in the U.S. – Only about 25 brokers with more than $200 million in revenue |
14 Massive Commitment to Shipper Satisfaction Built integrated network across North America in two years Over 2,200 employees at 94 locations in the U.S. and Canada 9,500 customers in the manufacturing, industrial, retail, food and beverage, commercial, life sciences and government sectors Over 24,000 active, vetted carriers, and approximately 400 trucks under exclusive contract Constantly investing in growing capacity, technology, sales staff, procurement staff and training Our broad footprint provides customers with local support across North America |
15 Rapidly grow sales force with aggressive recruiting and training Expand freight brokerage branches capable of mega-growth Capture more of the $50 billion less-than-truckload (LTL) opportunity Continue intense focus on on-time pickup and delivery – We are experienced at satisfying some of the most demanding shippers in North America, including last-mile and expedite Strategy Part 1: Scale and Optimization |
16 Accelerate Sales and Marketing Differentiate XPO by providing world-class customer service Single point of contact for each customer – Strategic accounts team marketing to largest 1,200 shippers – National accounts team focused on next largest 5,000 companies – Branch network expands our reach to hundreds of thousands of small and medium-sized shippers Capitalize on significant less-than-truckload (LTL) opportunity Cross-sell all services to new and existing customers |
17 One common platform for freight brokerage rolled out in all acquired companies Purchase transportation more efficiently as data pool grows Proprietary freight optimizer tools for pricing and load-covering put in place in 2012 Enhancements delivered to date include carrier rating engine and LTL upgrades, and new customer and carrier portals Scalable Technology Platform |
18 Increasing Productivity through Technology Highly scalable load execution and tendering via automated load-to-carrier matching Dynamic load optimization on a transactional basis between full truckload, less-than-truckload, partials and intermodal Ability to automatically cover, execute and tender loads in a short timeframe Customer-specific business rules to manage carrier routing and assignment, and operational execution |
19 Enhanced TMS Services Our operating system can customize customer-specific tariffs and routing guides We can integrate an ERP system, warehouse management system or supply chain management system with XPO via electronic data interchange or web services Large customers can leverage our technology, buying power, automated load execution platform, freight audit and bill pay services through the customer portal Carriers can be monitored with detailed scorecards |
20 Acquire attractive, highly scalable companies Gain capabilities, customers, carriers, lane and pricing histories with each acquisition Continue to grow carrier network, currently at over 24,000 10 acquisitions to date have added capabilities in LTL, last-mile, refrigerated, air charter, managed transportation, and soon intermodal 3PD, Turbo, Kelron and Covered brought strong relationships with Fortune 500 customers Optima expanded 3PD’s last-mile capabilities and technology Strategy Part 2: Acquisitions |
21 Hire strong industry veterans as branch presidents Position in prime recruitment areas Rapidly scale up by adding salespeople Low capital investment can deliver outsized returns Opened 23 cold-starts to date – 11 in freight brokerage, 11 in freight forwarding, one in expedited – Brokerage cold-starts on a combined annual revenue run rate of over $140 million Strategy Part 3: Cold-starts |
22 Founded and led four highly successful companies, including world-class public corporations Amerex Oil Associates: Built one of world’s largest oil brokerage firms Hamilton Resources: Grew global oil trading company to ~$1 billion United Waste: Created 5th largest solid waste business in North America United Rentals: Built world’s largest equipment rental company United Waste stock outperformed S&P 500 by 5.6x from 1992 to 1997 United Rentals stock outperformed S&P 500 by 2.2x from 1997 to 2007 CEO Bradley S. Jacobs |
23 Highly Skilled Management Team Partial list NCR, Avery Dennison, Arrow Electronics Electrolux, Union Pacific, Odyssey Logistics 3PD, Inc., Home Depot Affinity Logistics, GeoLogistics, Exel Stifel Nicolaus, Alex. Brown C.H. Robinson, American Backhaulers Sean Fernandez Chief Operating Officer Lou Amo Vice President, Carrier Procurement Karl Meyer Chief Executive Officer, 3PD division Charles Hitt Chief Operating Officer, 3PD division John Hardig Chief Financial Officer Marie Fields Director of Training The full management team can be found on www.xpologistics.com Echo Global Logistics Oakleaf Waste Management Dave Rowe Chief Technology Officer Mario Harik Chief Information Officer AutoNation, Skadden Arps Goldman Sachs, UBS, JPMorgan Chase Gordon Devens General Counsel Scott Malat Chief Strategy Officer United Rentals, United Waste Troy Cooper Senior Vice President, Operations |
24 Deep Bench of Industry Experience Partial list C.H. Robinson AFN, CEVA Logistics, Menlo Crowley Maritime, Coyote C.H. Robinson C.H. Robinson C.H. Robinson OHL, Schneider Logistics Ryder Supply Chain Solutions, BAX Global Ryder Integrated Logistics, Cardinal Logistics Livingston International, Echo Global Logistics Jake Schnell Sr. Operational Process and Integration Manager Evan Laskaris Director of Operations, Chicago Kip Douglass Regional Vice President Patrick Maguire Branch President, Montgomery Brandon Arnold Carrier Procurement and Operations Manager Drew Wilkerson Branch President, Charlotte Jenna Sargent Regional Sales and Operation Manager Greg Tallant National Account Manager Will O’Shea Chief Sales and Marketing Officer, 3PD division Andrew Armstrong Sales and Operations Manager AFN, Ryder Integrated Logistics Doug George Branch President, Dallas The full management team can be found on www.xpologistics.com |
25 2011 revenue of $177 million Currently at approximately $1 billion annual revenue run rate 42% YOY organic revenue growth company-wide in Q3 – Freight brokerage organic growth – up 146.1% Q3 2013 total revenue: $194.0 million (1) – up 173.3% YOY – Freight brokerage: $152.6 million – up 374.4% – Expedited transportation: $25.1 million – up 5.7% – Freight forwarding: $19.1 million – up 10.5% Key Financial Statistics (1) Net of intercompany eliminations Source: Company data |
26 Incentivized XPO Management Equity ownership aligns management team with shareholders Management and directors own approx. 41% of the company (1) (1) Based on SEC beneficial ownership calculation as of September 30, 2013 (2) Dilutive effect of warrants calculated using treasury method (avg. market close price of $22.31 for Q3 2013); total warrant proceeds of $75 million (3) Assumes conversion in full of $143.75 million in aggregate principal amount of convertible senior notes issued in September and October 2012 (4) As of September 30, 2013, dilutive effect of Q3 2013 weighted average outstanding RSUs and stock options calculated using treasury method (avg. market close price of $22.31 for Q3 2013) Common Stock Equivalent Capitalization as of 9/30/13 Common Shares 29.9 million Preferred Shares 10.6 million Warrants (Strike Price $7 per share) 10.7 million (7.3 million dilutive) (2) Convertible Senior Notes 8.7 million shares (3) Stock Options and RSUs 1.3 million shares dilutive (4) Fully Diluted Shares Outstanding 57.9 million shares |
27 Large, growing, fragmented logistics industry Well-defined process to scale up operations Planned acquisition of Pacer International Robust pipeline of further acquisition prospects Strong organic growth, including cold-starts Highly skilled management team incentivized to create shareholder value Passionate, world-class culture of customer service Clear Path for Significant Value Creation |