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2015-09-09

XPO Logistics, Inc.: XPO Logistics to Acquire Con-way

XPO will become the second largest provider of less-than-truckload (LTL)
services in North America, and will expand its global contract logistics
platform

$3.0 billion transaction will increase XPO's revenue to $15 billion and will
nearly double EBITDA to $1.1 billion

Transaction is expected to be substantially accretive to XPO's earnings in the
first 12 months

XPO intends to increase Con-way's annual operating profit by $170 million to
$210 million over the next two years through synergies and operational
improvements

XPO will remain asset-light with net capex of 3.3% of revenue, while
significantly increasing ground transportation capacity

Conference call scheduled for Thursday, September 10, 2015, at 8:30 AM Eastern
Time

GREENWICH, Conn. and ANN ARBOR, Mich. - September 9, 2015 -
XPO Logistics, Inc. ("XPO Logistics" or "XPO") (NYSE: XPO) and Con-way Inc.
("Con-way") (NYSE: CNW) today announced that they have entered into a
definitive agreement for XPO Logistics to acquire Con-way. The transaction
will enhance XPO's range of supply chain solutions by making XPO the second
largest less-than-truckload (LTL) provider in North America, and will expand
the company's global contract logistics platform. XPO will also capitalize on
synergies from the combination with Con-way's managed transportation,
truckload and freight brokerage businesses.

Headquartered in Ann Arbor, Mich., Con-way is aFortune 500
company with a transportation and logistics network of 582 locations and
approximately 30,000 employees serving over 36,000 customers. For the full
year 2015, consensus analysts' estimates for Con-way are $5.7 billion of
revenue and $528 million of adjusted EBITDA. The transaction is expected to
be substantially accretive to XPO's earnings in the first 12 months.

All of the acquired operations - Con-way Freight, Menlo Logistics, Con-way
Truckload and Con-way Multimodal - will be rebranded as XPO Logistics.

Outlook

XPO intends to raise its year-end 2015 target run rates for revenue and
EBITDA, and issue new long-term targets, upon completion of the acquisition.

Highlights of the Proposed Transaction

* Under the terms of the agreement, XPO will launch a tender offer for all of
Con-way's outstanding shares at a cash price of $47.60 per share. Following
the tender offer, if successful, Con-way will merge with a subsidiary of
XPO, becoming a wholly owned subsidiary of XPO, and all remaining
outstanding shares of Con-way will receive the same consideration paid to
stockholders who participated in the tender offer.
* The total transaction value is approximately $3.0 billion, including $290
million of net debt. The transaction value represents a multiple of
approximately 5.7 times Con-way's 2015 consensus EBITDA of $528 million.
The per-share cash price represents a premium of approximately 31.6 percent
compared to the closing price of Con-way common stock on September 8, 2015,
and a premium of 22.9 percent compared to the average closing price over
the trailing 90 trading days as of September 8, 2015.
* Bradley Jacobs, chairman and chief executive of XPO Logistics, will retain
these positions and lead the combined company. Douglas Stotlar, Con-way's
president and chief executive officer, will serve in a non-executive
advisory capacity during a transition period.
* The transaction is not conditioned on financing. XPO has received committed
financing from Morgan Stanley in the aggregate amount of $2.0 billion. The
company has approximately $1.2 billion in cash and an undrawn $415 million
ABL revolver, and Con-way has approximately $424 million of cash. XPO
expects to substantially increase its ABL capacity based on the addition of
receivables from the acquisitions of Norbert Dentressangle and Con-way.
* XPO will remain asset-light with net capex of 3.3% of revenue, and with
asset-based operations accounting for about a third of sales.
* The transaction is expected to close in October 2015, following the
successful completion of the tender offer and subject to the satisfaction
of customary conditions, including regulatory approvals. The boards of
directors of XPO and Con-way have unanimously approved the transaction.

Bradley Jacobs, chairman and chief executive officer of XPO Logistics, said,
"Our opportunistic acquisition of Con-way will make XPO the second largest
provider of less-than-truckload transportation in North America, a $35
billion market. LTL is a non-commoditized, high-value-add business that's
used by nearly all of our customers. Con-way is a premier platform that we
will run with a fresh set of eyes as part of our broader offering.
Importantly, we'll gain strategic ownership of assets that will benefit our
company and our customers during periods of tight capacity.

"Another crown jewel in this transaction is Con-way's subsidiary, Menlo
Logistics, an asset-light top 30 global contract logistics provider with
additional lines of business in freight brokerage and managed transportation.
Menlo serves blue chip contract logistics customers in verticals such as high
tech, healthcare and retail, which complement the verticals we serve at XPO."

Jacobs continued, "The Con-way transaction will nearly double our pro-forma
full year EBITDA to approximately $1.1 billion and increase our revenue to
$15 billion upon closing. We'll immediately begin executing our plan to
improve the operating profit of the acquired operations by $170 million to
$210 million over the next two years. We'll raise our year-end 2015 target
run rates for revenue and EBITDA, and issue new long-term targets, when we
close."

Douglas Stotlar, president and chief executive officer of Con-way, said, "This
landmark transaction provides immediate cash value for our shareholders and
reflects the outstanding contributions of our employees over our 86-year
history. The combination will mean more services for our customers, more
miles for our drivers, and more career opportunities for our employees as
part of XPO's global organization. We look forward to working with the XPO
team to complete the transaction and ensure a smooth transition."

Compelling Rationale for the Transaction

The company will further its growth strategy with the addition of Con-way's
transportation and logistics platform:

* XPO will offer best-in-class LTL services to its 16,000 customers in North
America as the second largest LTL provider, with world-class capabilities
for reliable, time-definite service. Nearly all of XPO's current brokerage
customers require LTL transportation, and the majority of Con-way's 36,000
customers can utilize multiple XPO services.
* XPO expects to increase annual operating profit from the acquired
operations by $170 million to $210 million through cost savings and
operational improvements executed over the next two years.
* The combination will expand XPO's global contract logistics platform by 22
million square feet, to a total of 151 million square feet, and will add
160 facilities to the footprint. The acquired operations serve blue chip
customers in verticals such as high tech, healthcare and retail,
complementing XPO's expertise in aerospace, retail, telecom, agriculture,
chemicals and food and beverage.
* The combination will strengthen XPO's position in the highly desirable
e-commerce sector, which is projected to grow at a pace of 18% to 21%
annually. XPO and Con-way both have e-fulfillment contract logistics
platforms in North America and Europe.
* Between the recent acquisition of Norbert Dentressangle, and the planned
acquisition of Con-way, XPO will have significantly more ground
transportation capacity to serve customers in Europe and North America.
XPO's network of brokered, owned and contracted capacity will have lane
density covering approximately 99% of all postal codes in the United
States, as well as the regions that produce 90% of the eurozone's GDP.
* The addition of Con-way's truckload fleet, including dedicated carriage,
will increase cross-border Mexico services, which include intermodal, truck
brokerage and expedite. Cross-border growth is projected to outperform
industry growth, due to the near-shoring of manufacturing.
* The combination will grow XPO's global ground transportation network to
approximately 19,000 owned tractors and 46,000 owned trailers, 10,000
trucks contracted through independent owner operators, and access to more
than 50,000 independent carriers. In North America, XPO will have
approximately 11,000 owned tractors and 33,000 owned trailers, 6,000 trucks
contracted through independent owner operators, and access to more than
38,000 independent carriers.
* XPO will share best practices between its extensive LTL networks in North
America and Europe to increase asset utilization and serve customers more
efficiently. In Europe, XPO has leading LTL positions in the United
Kingdom, France, Spain and Portugal.
* The company will have combined scale of approximately 84,000 employees at
1,469 locations in 32 countries. XPO will fully integrate all Con-way's
operations under the single global brand of XPO Logistics and will expand
the sharing of best practices throughout its organization.

$170 Million to $210 Million of New Operating Profit from Acquired Operations

XPO intends to increase annual operating profit from the acquired operations
by $170 million to $210 million through cost savings and operational
improvements executed over the next two years.

Within 12 months of closing the acquisition, the company expects to realize
cost synergies through the following actions:

* Improving purchasing and supplier management related to facility
operations, equipment, fuel, professional services, maintenance, supplies
and marketing;
* Leveraging its combined technology infrastructure to reduce Con-way's
annual technology spend of $227 million, which is largely outsourced;
* Eliminating duplicative back office and public company costs; and
* Expanding its freight brokerage platform with the integration of Con-way's
$200 million brokerage business, to share capacity and data through XPO's
proprietary Freight Optimizer technology.

In the second year, the company expects additional profit improvements by:

* Reducing its $3.6 billion combined spend on purchased transportation;
* Using the larger flow of data from its combined $2.7 billion of freight
under management to identify carriers, assign loads and fill backhauls more
efficiently; and
* Utilizing its extensive intermodal network to improve LTL line-haul
efficiency.

Advisors

J.P. Morgan and Morgan Stanley are serving as financial advisors t...

Författare Hugin

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