GXO’s New Acquisition Expands North American Presence
GXO Logistics, Inc. is expanding its logistics footprint in North America with the acquisition of e-commerce order fulfillment platform PFSweb.
Through a subsidiary, GXO will acquire PFSweb for approximately $181 million, or $7.50 per share in cash, a nearly 50 percent premium on PFS’ closing stock price on Wednesday.
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According to the contract logistics provider, the acquisition would position GXO to expand its operations within short cycle, high-volume product categories like luxury goods and cosmetics leveraging PFSweb’s relationships with more than 100 brands, including L’Oréal USA, Champion and Kendra Scott.
“I think this makes a lot of sense for GXO,” said Dr. Tom Goldsby, professor and Haslam Chair of Logistics at the University of Tennessee’s Global Supply Chain Institute. “The online fulfillment market is cooling down a bit after the go-go years of [the] pandemic, so the price seems quite reasonable for the capacity/capability gain. All the 3PLs are trying to make plays in this space, and buying it rather than building it probably makes good sense for GXO.”
Despite being based in Greenwich, Conn., GXO gets most of its revenue from Europe, thanks to its $1.3 billion Clipper Logistics acquisition. For the first six months of 2023, 36.8 percent of the company’s sales came from the U.K., versus 29.8 percent from the U.S. France, the Netherlands, Spain and Italy contributed 26.7 percent of sales. GXO is expanding in Germany.
PFS, on the other hand, generates 86 percent of its revenue from North America. It operates 11 fulfillment centers, including seven in the U.S., two in the U.K. and one apiece in Belgium and Canada. The company is planning to open two more distribution centers next year in the U.S. PFSweb’s fulfillment and distribution network complements GXO’s strong base in Europe and the U.K.
GXO operates more than 970 facilities worldwide totaling approximately 200 million square feet, but the PFSweb acquisition extends its primary offerings beyond outsourced warehousing and distribution.
Three new PFS support services will expand GXO’s capabilities, including payments and fraud protection, customer care and distributed order orchestration systems.
PFSweb employees will stay aboard, and the company will eventually be absorbed into GXO.
The companies are linking up as PFSweb had started to prioritize its core fulfillment offerings. It divested its digital commerce consultancy, LiveArea, to Merkle for $250 million.
And like GXO, PFSweb has significant plans to grow its fulfillment automation capabilities, laying out a three-to-five year automation roadmap at an August investor presentation.
The fulfillment provider said it is in the first stage of the roadmap, expanding existing automation that isn’t fully deployed, such as light-driven pick carts and walls, and paperless pick carts.
The second phase involves technologies that complement and enhance human tasks, such as automation for inventory cycle counts and autonomous mobile robots. The third stage will experiment with fully automated and smart distribution centers leveraging robotics solutions.
GXO said roughly 30 percent of second quarter revenue comes from automated sites, with total technology and automated systems implementations increasing 65 percent year over year. Goods-to-person systems (38 percent growth), collaborative robots or “cobots” (81 percent growth) and vision technology like sensors (96 percent growth) all saw additional deployments.
The enterprise value of the deal is $142 million and includes PFSweb’s cash balance of $39 million at June 30, 2023. The transaction is expected to close in the fourth quarter this year.
As the contract logistics company continues to evolve, GXO is closing a distribution center in Wilmer, Texas, and laying off 92 workers, according to a Worker Adjustment and Retraining Notification (WARN) Notice.
In recent months, GXO has ceased operations and laid off 281 workers at multiple locations after losing a customer, including logistics centers in Fort Worth, Texas, and Aberdeen, Md.
The GXO layoffs will run Oct. 31-Nov. 15. GXO did not disclose which customer terminated the relationship.
In 2021 the company was spun off from XPO, which offers asset-based less-than-truckload (LTL) freight transportation services. XPO recently expanded its service center in Garland, Texas, by adding 58 new doors, allowing the company to expand its capacity in the Dallas metropolitan area. XPO plans to add 900 new doors nationally by the first quarter of 2024.
