RXO to buy UPS’s Coyote Logistics for $1 billion, shares surge

United Parcel Service (NYSE:) announced Sunday it will sell its Coyote Logistics business unit to RXO (RXO) for $1.025 billion.

RXO shares surged more than 14% in premarket trading Monday.

Per RXO’s announcement, the deal will be financed through a combination of equity and debt, 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 an even greater focus on our core business,” UPS CEO Carol Tome said.

Following the announcement, Morgan Stanley analysts reiterated their Buy rating on RXO shares in a note.

“We see the deal as immediately accretive to RXO’s adj. EBITDA and EPS and view the transaction multiple at 12x pre-synergy 2023 EBITDA as highly attractive given where we are at the bottom of the cycle,” analysts said.

“We see the deal as significantly expanding RXO’s scale, catapulting PF RXO as the 3rd largest freight broker in North America,” they added.