Please ensure Javascript is enabled for purposes of website accessibility

XPO Logistics Stock Down 13%, Con-Way Up 34% on Acquisition Announcement: Here's What You Need to Know

By Jason Hall - Sep 10, 2015 at 11:46AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

11:40 a.m. EDT: XPO Logistics continues its recent spending spree, announcing it will buy Con-Way in a cash and debt deal.

What's happening: Shares of XPO Logistics (XPO 2.79%) are down nearly 13% in early trading today, after it announced that it would buy trucking company Con-Way (NYSE: CNW) for roughly $3 billion. Shares of Con-Way are up close to 34% today on the news, trading at around $47.44, a slight discount to the $47.60 per share that XPO Logistics has agreed to pay. 

Why it's happening: While it's pretty obvious why Con-Way shares are up (they should trade closer to the deal price until it eventually closes), XPO Logistics' share price drop is a little more nuanced. 

Trading volume is super-high today, so it's looking like a lot of shareholders (or a few large shareholders) don't really like the deal. The company will spend the vast majority of its $1.2 billion in cash on the acquisition, as well as adding to its $3.8 billion in long-term debt. It will also gain another roughly $286 million in net debt that Con-Way carries:

XPO Cash and Equivalents (Quarterly) Chart

XPO Cash and Equivalents (Quarterly) data by YCharts.

That's not to say this is a bad deal, but the market's immediate reaction isn't positive, a continuing trend so far in 2015 as XPO Logistics has been on an acquisition binge, having recently acquired a French shipping company for more than $3 billion. 

The company's stock is down about 28% since January, so it's going to be up to management to prove Mr. Market wrong and show that these acquisitions are in the best interest of its own shareholders. And while the 34% premium for Con-Way's shares may seem expensive, it's actually slightly below that company's share price as recently as January, so XPO isn't necessarily overpaying:

XPO Chart

XPO data by YCharts.

But will the acquisition pay off for XPO Logistics shareholders? It's going to take a few years before we know the answer to that question. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

XPO Logistics, Inc. Stock Quote
XPO Logistics, Inc.
$53.81 (2.79%) $1.46

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.