UPS (UPS) - Get United Parcel Service Inc. Report shares rose Monday after the package-delivery titan said was selling its short-haul trucking unit, UPS Freight, to the Canadian delivery company TFI International TFII for $800 million.
It’s part of a move by UPS to narrow the focus of its operations. UPS Freight, one of the country’s biggest short-distance carriers, is a unit distinct from UPS’s core package delivery service.
UPS shares recently traded at $162.05, up 1.9% on the NYSE. They have jumped 37% over the past six months amid heightened demand during the pandemic.
TFI shares flew on the news, recently trading at $65.81, up 28%. They have jumped 66% over the past six months.
UPS Chief Executive Carol Tomé said in a statement that the "agreement allows UPS to be even more laser-focused on the core parts of our business that drive the greatest value for our customers.”
UPS expects to report a related pretax impairment charge of around $500 million in its 2020 financials.
As for TFI, the St. Laurent, Quebec, provider of freight transportation and logistics services, this "highly strategic transaction [will] strengthen our service offerings to customers as well as our ongoing relationship with UPS,” said Chief Executive Alain Bédard.
“Our strategy of operating independent business units with a high degree of accountability is well-suited for building on UPS Freight’s strengths and improving margins over time.”
Further, the deal will “extend our longstanding record of successful growth through acquisition, which will vault TFI International to one of the largest North American LTL [less-than-truckload] carriers,” he said.
The transaction is subject to conditions including regulatory clearances. The companies hope to close in the second quarter.