Welcome to the XPO Logistics and Norbert Dentressangle Investors Conference Call and Webcast. My name is Ellen, and I will be your operator for today's call. Please note that this conference is being recorded. Before the call begins, let me read a brief statement on behalf of the company regarding forward-looking statements. During this call, the company will be making certain forward-looking statements within the meaning of applicable security laws, which, by their nature, involve a number of risks, uncertainties, and other factors that could cause the actual results to differ materially from those projected in the forward-looking statements. A discussion of factors that could cause actual results to differ materially is contained in the SEC filings of XPO.
The forward-looking statements in the press release or made on this call, as of today, and XPO has no obligation to update any of these forward-looking statements, including its outlook, except to the extent required by law. You can find a copy of the press release, which contains additional important information regarding forward-looking statements, in the Investors section on XPO's website at www.xpo.com. I would now like to turn the call over to Mr. Brad Jacobs. Mr. Jacobs, you may begin.
Thank you, operator, and bonjour de Paris, everyone. We're very excited to be here in Paris today, speaking about what is our most transformational acquisition yet, the iconic Norbert Dentressangle. With me are John Hardig, our CFO, and Scott Malat, our Chief Strategy Officer. We also have Hervé Montjotin with us. Hervé is the Chairman of the Executive Board and CEO of Norbert Dentressangle. We're very pleased that Hervé will be joining XPO as CEO of our European operations and President of the parent company. I'm very much looking forward to working with Hervé to grow our global presence footprint. Norbert Dentressangle is one of the most important transportation and logistics companies in the world. We gave you a good amount of transaction details in yesterday's press release, so today we're going to cover the highlights and then move to Q&A.
So here are eight reasons why we find this deal compelling. Number one, it's going to make XPO a truly global supply chain solutions provider. We'll have over 52,000 employees at 863 locations in 27 countries, and we're going to serve more than 30,000 customers. We'll have about $8.5 billion of revenue and about $545 million of EBITDA. There's only a handful of companies in our industry worldwide who operate at this level, and we're going to be in the top 10. As we've said for the last 3.5 years, we believe that scale is imperative in this business in order to serve customers effectively, because customers value deep access to capacity and a broad range of services. Number two, Norbert's service range closely mirrors our own, and our geographies are complementary.
Norbert has industry-leading positions in contract logistics and freight brokerage, both of which are important parts of our current business. Number three, Norbert's contract logistics business generates about $2.8 billion. Contract logistics is a very attractive service offering for our customers and for us. There are significant barriers to entry to perform this non-commoditized service that has a high value-add component. We typically have long, multiyear relationships with contract logistics customers. In the case of Norbert, they do a lot of specialized logistics in cold chain and chemicals, for example. It's obvious that they're doing a great job in pleasing their customers since they have a 97% customer renewal rate in contract logistics. We can now grow on a global scale the highly successful contract logistics business that we have in the United States, run by Louis DeJoy.
Number four, within contract logistics, Norbert has a vibrant and growing business in e-commerce fulfillment, including reverse logistics. They have a service called Red Online, which is a leader in outsourced e-commerce fulfillment in Europe. Red Online does about EUR 250 million of annual revenue with both B2B and B2C customers inside of a EUR 5 billion market opportunity. Norbert grew this business organically by 31% last year. We've had a great success with e-commerce logistics ourselves in the U.S., and we're excited about the growth potential in Europe. Number five is freight brokerage, which is part of their transportation segment. Norbert Dentressangle has a non-asset freight brokerage business with annual revenue of over EUR 1 billion. We see a huge opportunity to take our best-in-class proprietary Freight Optimizer technology and turbocharge the growth here in Europe.
Norbert has achieved great success in brokerage in Europe, and we'll build on that. Norbert has access to Europe's largest truck fleet network through a mix of 7,700 owned trucks, 3,200 trucks contracted through independent owner-operators, and access to an additional 12,000 independent carriers through their brokerage. So now XPO Europe will have significant lane density, covering about 90% of the Eurozone's GDP-producing regions. Number six, this combination will be very positive for our customers, and we've already had a very positive reaction in the customers that we've contacted here in Europe and the few we were able to reach last night in the States. We're going to be able to better meet customers' needs and provide more solutions globally in both directions.
Many of our current customers have a major presence in Europe that we'll now be able to serve with our new platform. They've been asking us to do more for them in other parts of the world, and now we'll be able to say yes. Number seven, the transaction will open many doors for career advancement and geographic rotation for people within our combined company. We'll become even more of a magnet to attract top talent in the industry. We'll have lots of our European colleagues spending time in the States and vice versa, learning different approaches to the business and sharing best practices. Number eight, the company we are acquiring has been built meticulously, step-by-step, in a very organized way, and over 36 years, has become an icon in Europe.
Norbert Dentressangle has superb employees, including a stellar management team, substantially all of whom are staying. That's very important to us because we're going to be growing globally, both organically and through acquisitions, shoulder to shoulder with our new European colleagues. So that's an overview of the business and some of the reasons why it's a solid strategic fit for us. I'll close my remarks with the financial implications for XPO. In one fell swoop, this acquisition will more than triple our EBITDA to about $545 million and increase our revenue to about $8.5 billion. We'll be very close to achieving our 2017 targets for revenue and EBITDA two years ahead of plan. So in summary, this is an exciting transformational acquisition for us.
It's a defining moment in our growth, but at the same time, it's just a midterm step on our trajectory. We're still in the early innings of our long-term plan with a clear line of sight to further growth, both organically and through additional acquisitions. We couldn't ask for a better platform in Europe than Norbert Dentressangle, and I want to publicly express my sincere appreciation to the company's founder, the esteemed Monsieur Dentressangle, for agreeing to sell the company to us and trusting us with its future growth as part of XPO Logistics. With that, we'll go right to questions. Operator?
Thank you. We will now begin the question-and-answer session. If you have a question, please press star then one on your touch tone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star, then one on your touch tone phone. The first question is from Allison Landry with Credit Suisse.
Good morning, and congratulations on the deal. In terms of the 2017 targets, how do we think about what happens from here? You know, given, you know, you're obviously going to be hitting those two years early.
Yeah, Allison, it's Scott. Thanks. On the 2017 targets, stay tuned. We will update the targets. We continue to expect significant growth over the next several years. We're only in the very early innings of a long-term growth story, and we'll spend a good amount of time making sure we set the right targets for the next several years.
Okay. Just as a follow-up, thinking about this sort of being the third European deal in the last month in the transport sector, you know, following FedEx, TNT, and Genesee & Wyoming, what does this imply or what is your view on what this means sort of for sort of growth globally and the direction of where transportation is heading over the next decade?
I'll take that, it's Brad. I'll take that, Allie. Good morning. So, we believe we're buying at an opportunistic time when Europe is starting to grow again. It has been a tough few years for the Eurozone, but it does seem that it's bottoming out and starting to rebound. It doesn't hurt that the dollar is strong against the euro right now. This deal would have cost us 20% more in dollar terms had we done it a year or so ago. But that's not the reason why we're doing this transaction. We're not speculating in currency. The reason that we're doing this transaction is Europe has twice the population of the United States, and European supply chains need quality companies to help them operate at top efficiency, and, and Norbert just does a fantastic job at that.
If you look at Europe, the outsourcing percentage is roughly about 27%. You still have about 73% that's insourced. That trend of outsourcing, in our view, is going to continue. And companies that are really good at it, like Norbert Dentressangle, which will now go under the name of XPO Logistics, should get a lot of growth as a result of that.
Okay, great. Thank you so much, and congrats again.
Thank you.
The next question is from Rob Salmon with Deutsche Bank.
Hey, good morning, guys, and congrats on the transaction.
Good morning.
You know, Brad, when I'm thinking about the European opportunity for you guys, clearly, there's a lot of revenue, as well as cost synergies, particularly, you know, with regard to the contract potential in the contract logistics, as well as the utilization of the freight brokerage optimizer. Could you kind of spell out kind of what sort of transaction synergies, whether they're revenue or cost, that you see over the next few years related to this deal?
Yes. So there's not a lot of cost synergies. We're in different geographies, except for the contract logistics in the United States, and we don't plan on having layoffs. This is a deal that's around growth and building up and being able to serve customers more and cross-selling to them in more than one geography and growing the top line. In terms of freight brokerage, the main synergy that we see is technology. So as you very well know, we've spent many millions of dollars in developing our proprietary Freight Optimizer platform, and every company that we've bought, that we put on that system, has grown much, much faster post-acquisition than before. It's just very well thought out and well designed, and we intend to give our European colleagues the benefit of that technology in due course.
I'm very confident that they will have the same positive experience from utilizing that technology as we have in the United States. If you look at our technology combined spend, it's you know, approaching $250 million, which in the transportation and logistics industry, there's not a lot of companies that spend that much money on technology and invest on making sure we're at the cutting edge. So I see a big, big opportunity there. Now, you mentioned contract logistics. There will be some opportunities to serve customers better on a global basis as a result of growing in scale and contract logistics. But where I see a big synergy is cross-fertilizing best practices. We're doing some really cool things in our supply chain operations, in our contract logistics operations in the United States.
They're doing a lot of cool stuff here in Europe, in their contract logistics. We're going to be doing a lot of cross-fertilization, and that's going to be across the whole company. So we've already had a lot of our colleagues in America raise their hand and say, "Hey, we don't mind moving to Europe for a year.
So I'd like to live for a couple of years in Paris or in Rome or in London, and have a nice time, and also learn the business practices of how things are done in Europe, maybe learn some new skills, learn some new ways to approach the business." And I anticipate it going the other way, too, where we'll have dozens of people from Europe spending some time in the U.S., dozens of people from the U.S. coming over to Europe, and we'll have a kind of multinational trip cross-training program. And I believe long term, that's a real big synergy to get the best practices from both organizations.
That's helpful, Brad. And then just kind of thinking about the significant investment within Europe. You guys have always highlighted a very strong acquisition and organic growth opportunities, domestically or kind of more broadly in North America. Has your enthusiasm at all kind of moderated about what that growth opportunity was? Or should we kind of view this as more, this was a very unique opportunity which could give XPO the global footprint and as a result of the significant investment here?
Rob, is the question, what do we think about the acquisition opportunity in the States?
Yeah, yeah. The question is, that said it exactly.
I like the acquisition opportunity in the States. We're in the middle of a whole bunch of discussions of acquisition opportunities there that make a lot of sense. We're very disciplined on price, on valuation, on strategic fit, on cultural mix, and want to make sure it's not just on a spreadsheet, but actually in real life it's going to work, and we have a high level of probability and confidence that it's going to succeed. So far, every single one of the acquisitions we've done to date has worked, has been integrated effectively, has grown, and things have gone swimmingly. We want to make sure we continue that track record, so we're going to be very careful with the acquisitions we do, whether that's in the States or whether that's in Europe or whether that's in Asia.
Now, with respect to where our acquisitions will be over the next year, who knows? We have discussions, lots of discussions going on in the States. And now with Norbert Dentressangle, we have a whole new platform, a whole new theater, a whole new arena, a whole new geographic area to do more acquisitions. And as part of the due diligence, negotiation, and management to management bonding that we've done in the last couple of weeks intensively here in Paris, we have examined Norbert's team's acquisition candidates, and we had a really interesting meeting with Hervé and Cédric, the head of their M&A, to go over each one of their top candidates, their top couple dozen candidates that they were planning to consider buying had XPO not come on the scene for them. And I'm impressed.
I was familiar with some of those targets, and most of them I was not familiar with. It's a very interesting learning experience, and I'm feeling very happy that we've got the benefit of their expertise and their historical knowledge of these targets and their relationships with these targets... and their deep understanding of the operational fits and where the landmines are, that of which deals we want to avoid, and where the crown jewels are, ones we want to go after. I would expect over the next two years, let's say, that we will do a handful of acquisitions in Europe, but it all depends on how the stars line up. That's not to say, and I don't want to give you the wrong impression. That's not to say that we're not- that we're...
I mean, we are still enamored with the United States. There still are great acquisitions in the United States, and we're likely to do more acquisitions going forward there as well.
That's really helpful. I guess, just given that strong acquisition pipeline, you know, how are you guys thinking about kind of the, the optimal capital structure here, you know, given the, the debt that you'll be raising to, to fund the transaction?
We've always said that we are committed to having a prudent capital structure, and at the same time, we want a modest amount of leverage to improve the earnings, to improve the returns. We've always said we want to be in the range of 3-4 times leverage, and nothing has changed. Can we go a little bit above that by a turn or two for a short period of time, in an intermediate phase while we're doing an acquisition? Sure, that's no problem. Will we be at a zero leverage net debt level like we are prior to making this commitment sometimes? Yes, we will. We had more cash than we had debt. But we will evaluate all options, and what's great about it is we've got options. We have various capital markets we can tap.
We have not made a decision yet, which is the most attractive. We're considering all the pros and cons, and whatever makes the most amount of sense for our shareholders, that's what we'll do.
Thanks so much for the time. Congrats, again.
I'm sorry, I missed you, Rob. Say it again, please.
Oh, no. Thanks for the time and congrats on the acquisition.
Oh, thank you. Thank you, Rob.
The next question is from Chris Wetherbee with Citi.
Great. Thanks. Good morning, guys. Congratulations as well. Just thinking about sort of going back to the European acquisition opportunity, you know, I don't know if you can kind of... You obviously gave us some color as for how you think about that opportunity. Any way to compare that to how you see the opportunities in the United States? I don't know if that's necessarily an apples-to-apples way to look at it, but I'm just kind of curious to get a rough sense if it is, you know, quite as robust or how you think about it.
They're a little cheaper by a couple turns in terms of multiples. There's fewer buyers. There are a number of acquisition opportunities. And what I found most interesting during our discussions the last couple of weeks is understanding the universe of ones that are- we'd be wasting our time going after for one reason or another, and other ones that could be quite intriguing and quite additive and, and would make a lot of sense from an operational perspective. So there are definitely things that make sense for XPO to do in Europe as opposed for, for-- in terms of acquisitions. And I would say it's as rich in terms of fertile ground as it is in the United States. This now...
So we would have been nervous, frankly, about doing many acquisitions of doing any of the many acquisitions that have come across our desk in Europe prior to Norbert Dentressangle, because we didn't have a platform, we didn't have a management team, we didn't have an infrastructure, we didn't have a back office. So what would we be integrating those smaller acquisitions into? What would we be putting them together with? Now that we've got this great platform of Norbert Dentressangle, with a tremendous management team, tremendous infrastructure, tremendous knowledge and expertise of the market, there's some interesting things to do here. But we're going to be prudent, we're going to be responsible, we're going to go to measured pace, and we're going to make sure that we don't lower our guard and fall in love with anything at the expense of valuation.
Okay. That makes a lot of sense. And in terms of that platform, you mentioned it obviously, with the acquisition, you gain that platform at scale, and as you've done a great job of sort of building out the platform and layering on acquisitions on top of it. Are there any challenges to sort of continuing to do that through the European markets with the platform that you have in place with XPO, as well as the platform that you've just acquired? Or is it something that we should think about sort of similarly to the progress and the success you've had in the United States?
Well, let's talk about that in two stages. One stage is, what about the integration of Norbert Dentressangle into XPO? Fortunately, this is not a fixer-upper. This is not a company that needs a whole lot of improvement. This is a company that's doing just fine. This is a company that's very well-positioned and very well-respected throughout all of Europe by its customer base. This is a company that has very long-term relationships with a real blue-chip customer list, and it's a who's who of the Fortune 200 Europe, for Europe, Europe, Fortune 200. So this is a company that's in good shape.
Secondly, substantially, all the management team under Hervé's leadership is staying in place and has their head in the game, and is excited about this, and wants to be part of XPO Logistics, and is looking forward to be part of a—being part of a global organization, and this being the platform for further growth going forward. So there's a really good morale builder. There's a really good commitment and engagement on the organization. So there's not a whole lot of front-end integration to be done with the European part of Norbert Dentressangle, other than a sales and marketing and branding and changing the name from Norbert Dentressangle to XPO Logistics as soon as practical. In the U.S., they have a great contract logistics company, which used to be called Jacobson, which is how we came across Norbert Dentressangle. We lost. We wanted to buy Jacobson.
We had high hopes about buying it. We thought it would be a perfect fit with XPO... We were very, very interested in buying Jacobson, and unfortunately, we came in number two, and other than in horseshoes, you don't win anything for coming in second. Norbert Dentressangle beat us in that transaction, and that's why we started studying Norbert Dentressangle, and got enamored with them. But Jacobson was very much in our line of sight to be buying, and now we'll be able to figure out a way to merge the Norbert Dentressangle's contract logistics organization in the United States under the very able and put that together somehow with the former New Breed organization, which is run by maybe the best contract logistics expert in the world, Louis DeJoy.
We can put this great talent together and these great management teams together, and come up with a plan that we can put those two organizations together and position ourselves with customers in a much more superior way than we have, even in the past. So that's the opportunity there in terms of integration there. It'll all go under the name of XPO Logistics, though. The brand name worldwide is XPO Logistics. We don't have any other names whatsoever. That's part one. Part two, on the integration of future acquisitions. Look, most roll-ups fail, and the reason they fail is anyone can buy a company, but most companies don't think through carefully the integration. They're good at buying, they're not good at integrating.
We pride ourselves at having an organizational infrastructure in place, having built the company very solid, with a very clear expectation that we were gonna add billions and billions of revenue in the coming years, and we have that organizational infrastructure. We have that HR organization, we have that IT. We have what is necessary to integrate companies going forward. Plus, Norbert has done acquisitions, and they have an integration discipline as well. So in my opinion, while there's always risk when you do acquisitions, which is why we do it in a measured pace, the risk is much less in the case of XPO because we have what it takes. We have the cultural DNA, we have the experience, we have the temperament, we have the expertise to integrate. So I, I don't lose sleep over our ability to integrate.
That's great. That's very helpful and thought out answer. Thanks very much for your time, guys, and congrats again.
Thank you, Chris.
The next question is from Bill Greene with Morgan Stanley.
Hi there. Good morning, and good afternoon. Congrats. But Brad, I wanted to ask you a little bit about the overall sort of strategy here. So, if we look at sort of what this does to the organization, obviously, you're in a lot of different businesses now. Can you talk about how you got comfortable with the complexity of all these different businesses and putting them together, but also the geographies? Because there's a pretty substantial complexity at operating at a global level, and my impressions in the past was that you sort of shied away from some of that, focusing more on the U.S. because of that complexity. So can you talk about how you got comfortable there?
Yes. So you're absolutely correct that when we think about risk, and we think about managing risk, being in multiple countries, particularly over 20 countries, is in the bad guy section in terms of risk. It's obviously in the good guy section in terms of customer satisfaction and capabilities to please customers, and being able to get business that only can be given to companies that have global capabilities. But from a risk point of view, clearly, the more countries you are in, you have currency risk, you have political risk, you have cultural risk, you have just a tax risk, I mean, there's just a lot of risk. You have just span of control risk. That being said, we're comfortable with this risk.
As you know, in my background, in my previous jobs, particularly in the oil business, and I was in, you know, a dozen different countries. Our financial organization came from GE and from Home Depot, and they've worked in many different currencies and many different versions of GAAP in various countries, and we're comfortable with that. But in terms of the risk level, it's a manageable level of risk because we're buying a company in Norbert Dentressangle that is well-managed. If we were buying a company that was mediocre, or if, God forbid, we were buying a company overseas that was a fixer-upper, well, that would be a problem. And there, the risk category would overcome the, the good guy of how it positions us better for, in terms of customers.
That's, you know, just managing, just looking at all the pros and cons, advantages in how we can deal with customers and growth, disadvantages of a little more complexity, a little more geographic risk, mitigated by the excellence of the management team and processes and controls already in place. That's how we got comfortable with it.
When you think about the organic growth rates of these businesses, I'm not as familiar with Norbert, so I can't really think, but I could look at some of their historical numbers. But when you think about the opportunity going forward, we often sort of talked about numbers in organic senses being kind of in the... anywhere from 15%-25%, depending on the specific business you and I were discussing. Can you sort of just give us a sort of overall sense? How do you think about... I know there'll be more acquisitions, but how do you think about the idea of organic growth now that you're at this size? Because generally, most of us would say with larger numbers, growth will slow.
And I will join that chorus, and I've always said that, that the kind of organic growth we've had, that's been 50%, 75%, 39%, depending on which segment you're looking at, what purity you're looking at. We've always said, "Don't get married to those numbers, because that is not sustainable when you become a $5 billion company, a $10 billion company, a $20 billion company. It's the law of large numbers." Having said that, let's step back and look at the Norbert Dentressangle business. So it's about, in 2014 numbers, about a EUR 5.1 billion business. And the bulk of that business is the $2.6 billion that's in contract logistics. How fast can we organically grow contract logistics in Europe?
How fast can we grow contract logistics, putting together the former Jacobson and the former New Breed organizations? I'm optimistic about that. I don't want to commit to an exact number because we haven't done a real careful meeting of all the senior management, of all the parties involved, and really brainstormed and gotten all the salespeople together and all the ops guys together and really come up with a real detailed, bottom-up, worked-up plan. But I am optimistic that the growth rates of the former Jacobson, the former New Breed, and the soon-to-be former Norbert Dentressangle contract logistics organizations will only go up. I can't see any way it won't increase.
So when you look at Norbert Dentressangle, a lot of times people have the image that, okay, that's kind of a trucking company, which it partly is. But when you look at the numbers, we look at it as majority of the business comes from contract logistics. That's about EUR 2.6 billion, and that's what I think about organic growth there. Let's look at the second segment that they have, the second of three segments, transportation. That's about EUR 2.3 billion out of the EUR 5.1 billion. Let's break it up. They've got a little over EUR 1 billion in freight brokerage. I only see that getting faster, growing faster because of what I mentioned before, the technology, the cross-fertilization, the focus on that. They've got about EUR 0.25 billion in dedicated contract carriage.
That, in Europe, like in the United States, is a high-growth business. It's a stable business. And then they've got about $1 billion plus in asset-backed trucking, with regular asset trucking. And so when you look at the asset trucking part, it's a little—it's about 20%. It's about a fifth of the business. Now, when we looked at analyzing Norbert Dentressangle, we said, "Well, wait a minute. Is this a trucking company? Is this a..." And our impression was, you know, you picture those big red trucks with, say, ND on the side of them. We thought, oh, this is a business that must have, you know, the majority of their business doing trucking. It must have real high CapEx and real low free cash flow. Turned out not to be the case.
Turned out that upon real understanding of it, it's about 20% a trucking company, and the CapEx is actually very low. It's not much higher than ours. So we have roughly about 2% of revenues is CapEx. They have roughly about 2.5% of revenues is CapEx. So it's a low CapEx. And that includes the contract logistics and the transportation and the whole company's CapEx. So the CapEx is a reasonable amount. Having that access to those 7,700 trucks, having trucks in 90% of the GDP of the Eurozone, is a big advantage. It's a big advantage with customers. There's so many customers, especially here in Europe, that won't deal with you unless you have the assets.
But that's the hook, that's the foot in the door, and then there's all these other services that you can do together with the customer, provided you've got that. So that's a business we like. That's a business that's going to grow. So that's the EUR 2.3 billion or so of transport. And then they have a couple $200 million of freight forwarding. They, they call it Air and Sea, but we would call it air, freight forwarding in the States. So they have about EUR 200 million-plus freight forwarding. We have about $200 million plus of freight forwarding. You put those two together, you have a $425 million or so freight forwarding business.
One plus one will clearly equal more than two on that because we will be able to leverage, being twice the size, better buy rates with Air and Sea carriers. We'll be able to serve customers more as we get more access to complementary lanes. We're starting to get a little critical mass in freight forwarding, which was what my big concern was, that we weren't a major player in that. We're still not a major player in that, but we're less of a minor player in that, and that should spur organic growth as well. So those are the different pieces of the puzzle. That's what will determine the organic growth going forward. And then there's geography. There's external factors, 'cause you can work really hard, and if the external factor, if the external environment is not strong, you're not going to have high internal growth.
That being said, our view is, we may be right, we may be not right, but our view is that the Eurozone has more or less bottomed. It's more or less coming up from the trough, and over the next few years, it's going to be up and to the right. It's going to be better. And if we are right with that hypothesis, we'll get a little wind to our back in terms of organic growth there. Does that answer your question, Bill?
Yes. Let me just clarify, though, 'cause I feel like I heard a contradictory statement. I just want to make sure I understand it. What you're basically saying, essentially, is that, look, we've got these organic growth rates. Given the size of the company, one would expect growth rates might be lower, but we think there are some synergies here, some opportunities, whether it's technology, cross-fertilization, or whatnot, that will allow us to sustain or even expand that growth rate going forward.
You said it much more articulately and concisely than I did, but I agree with what you just said.
Okay, fair enough. All right. Thank you for the time. I appreciate it.
Thank you, sir.
The next question is from Brandon Oglenski with Barclays.
Well, good afternoon, everyone, and congrats on getting this big deal done.
Thank you, Brandon.
Brad, you know, Brad, I want to come back to this line of question because, you know, and I guess I'm repeating the others on this call, too, but we had thought the scope and scale of XPO was really going to be a North American asset-light business, and it feels like a lot of scope creep here in the forward trajectory for XPO now, because you're getting an asset-based trucking business. We're into Europe now.... Does this have implications for the U.S. as well? Are you looking beyond the non-asset model? Should we be thinking this is, you know, somewhat of a transformation in the forward strategy of XPO?
We're not. This is a really good question. We are not specifically targeting out trucking companies. That's not, you know, that's not what we're trying to do here. Having said that, like Norbert Dentressangle, where they have a business that's 80% not trucking and 20% that's trucking, and the trucking adds something to it. It makes sense. There's a reason for it to be there. We will keep an open mind on acquisitions of companies that are great companies that have some portion of their business in trucking, but lots of great businesses that aren't in trucking. We'll evaluate it based on cultural fit, how compelling it is strategically, how it would work, how it would mesh with our existing operations, what are the growth rates? I mean, we'll look at everything, but we're not going... I mean, you said scope creep.
I guess we plead guilty a little bit to that. If you'd asked me, you know, in the previous years, do you think you're going to go to Europe and buy a company that's 20% trucking? I probably would have said, probably not. But I don't want to get boxed into a business plan that is rigid, that is inflexible, that can't adapt to opportunities. I want to stay agile. I do want to stay flexible. I want to be opportunistic. I want to be open-minded to situations that make sense, that will help our relationship with customers, that customers will want us to do, and that are good deals for our shareholders. So yeah, a little bit of flexibility, but that's fine with me. I, I, I don't mind that.
Okay, and I think I wouldn't be a good analyst here if I didn't bring up the details of the deal here. But can we talk about run rate cash flow generation of the combined business now? Because you did take on quite a bit of debt here, or it looks like you will. Maybe we should go over the financing details, too. But it sounds like, you know, incrementally, we're going to take on at least $2.5 billion or $3 billion more of debt. So when I look at the accretion, this isn't very accretive with that level of debt. And can we also talk about the CapEx that you disclosed? Because I think it's going to run up to $225 million. Does that include everything for the company, or is that just based on technology investments?
Is that a one-time investment, or is this run rate type of CapEx levels? And I know it's a big question, but maybe we can walk through where we think the cash flow is going to be in the long run.
Yeah, I'll start with the EBITDA and CapEx, and then John will start to go into more of the financing. Does that make sense? So from an EBITDA perspective, we looked at more of a trailing basis, EBITDA, at $545 million, and we'll be putting together pro formas over the next several weeks, and you'll get a better feeling for directionally how much more opportunity we have as you go through the year. In terms of CapEx, we have about $70 million of CapEx at XPO. There's about EUR 80 million, or about $90 million of maintenance CapEx inside of Norbert. And then, in total, when you include the growth CapEx, you're talking about $120 million or so. So we're under $200 million in CapEx on a combined basis.
I'll just speak to the financing. As Brad mentioned early in the call, or it was in the press release, you know, we do have a debt commitment from Morgan Stanley to finance the transaction, and we're in the process now of putting together our marketing materials to go out to market and do a, you know, some high-yield debt here to finance the transaction. That's not to say that we will finance this all with debt, because we are looking at other alternatives. And we've said very clearly that our leverage goals are to be in the 3-4 times leverage range.
We might go a little bit higher short term, but that's where we want to be long term, and I think that'll give you a sense of what we're thinking about permanent capital structure, although that's not really being determined today because we, you know, we're going to prepare to go out to market to raise the money, and that'll be somewhat dictated by market conditions and what the mix of capital will be. From an interest rate perspective, the indicative rate on the debt that we've received from Morgan Stanley is somewhere in the range of 5.75%-6.5%. That's somewhat dependent on which market we're raising the capital in.
Given the fact that, we're going to be generating a lot of EBITDA in euros, we've got the opportunity to go out into the euro market and raise some, some euro-denominated debt. That market's a very, very hot market right now, and so that's where the lower end of that range comes in terms of the interest rate. And, and, you know, we have, as you all know, we have about $70 million or so of annual interest today based on our current, debt. And then if you think about, you know, use your own assumption in terms of how much additional debt we would put on, keeping in mind those long-term leverage goals and the rates I gave you, that'll give you a sense of how much interest we'll have post-deal.
And then you said something else also. In terms of accretion, from a free cash flow per share basis, this is very accretive. From a net income basis, I think it will be accretive as well. Give us some time to get the amortization, that last piece out, but I think this is a transaction, given the low capital intensity, that's going to drive a lot of free cash flow on a per share basis.
Okay, and Scott or John, I mean, I just wanted to clarify, because you did put in the slides here, combined annual technology spend of approximately $225 million. What can we just clarify, is that an expense or are we thinking CapEx?
That's a combination of CapEx and OpEx. With XPO, we have about 125 million of that 225, and that's about $50 million of that is capitalized. To give you an idea.
Okay.
Go ahead.
All right. And then lastly, in your slides as well, you touched on a follow-on potential. Can we talk to, you know, where you want to see the equity structure and under what circumstances do you think you would go to market?
... We have alternatives. We have alternatives to raise equity privately. There's pros and cons to that. We have alternatives to raise equity publicly. There's pros and cons to that, and we will now begin studying what alternatives, what alternative or alternatives we want to pursue. And whatever makes the most sense, all things considered, that's what we'll pursue.
All right. Thank you.
Thank you.
The next question is from Kevin Sterling with BB&T Capital Markets.
Thank you. Good morning, and let me add my congratulations. And Brad, I take it you've been brushing up on your French. Very good. Let me ask you, you, it seems like you guys are targeting a quick close here in the second quarter of this year. Do you anticipate any regulatory hurdles, given some of the previous regulatory hurdles that we've seen come out of Europe?
Well, some of the other companies that had regulatory issues had an enormous amount of overlap in their operations. We have almost nothing in Europe, so from an EU perspective, I can't imagine that it's gonna take a long time to analyze because there's not a whole lot of overlap. In the States, the regulators will look at the former New Breed and the former Jacobson overlap. We have a fairly different customer base, a fairly different geographic base. I don't. I'm not aware of any antitrust issues that exist in the United States, and I'm hoping we'll get through antitrust clearance fairly quickly, but it's hard to predict the government.
I got you. So there's not... you touched a little bit on contract logistics here in the U.S., so there's not much overlap between New Breed and Hervé, is that correct?
Well, the only overlap with New Breed, the former New Breed, 'cause now we've rebranded everything as XPO Logistics, so we call that XPO Logistics Supply Chain. The only overlap between XPO, Norbert Dentressangle's former Jacobson operations, is the contract logistics, and the contract logistics doesn't really overlap that much in terms of customers, in terms of geography. In principle, I don't see this being a difficult review, but again, I can't speak for the government.
Yep. You talked a little bit earlier about freight forwarding, and, you know, you guys are getting a little bit bigger, but you're still relatively small. I think you said you're looking for some nice organic growth there. But do you see... As you think about acquisitions in that space, do you see any opportunities on the horizon in freight forwarding now that you've gotten bigger with this acquisition?
We don't have anything immediately actionable that we're about to pull the trigger on. There are a few freight forwarding companies that we're studying, and we're just trying to understand it and see what it would mean to us. We need to understand better, and we have an open mind. It's not our first and topmost goal to do a big freight forwarding acquisition. But again, going back to the earlier comment I made in response to Brandon's question, we wanna keep flexible. We wanna keep agile. We wanna, hey, keep an open mind to things that work for customers and are positive for shareholders. So if that means freight forwarding, if we get satisfied with that, then that's great, so be it.
But we won't do something like that unless we're comfortable that this would give us. This is compatible with our strategic goals.
Right. Right. And my last question, Brad, is, can you talk a little bit about brokerage in Europe, and maybe compare it to the U.S. regarding similarities and differences, and in particular, how you buy capacity in Europe, given the geographical makeup?
So the main differential there is just what you just mentioned. So it is fairly segmented country to country, and there's language issues, there's culture issues. There's really nobody who's buying transportation across the continent in a very efficient way, accessing the whole market. So there's a little bit of a silo approach towards brokerage here in Europe. We are going to have a lot of brainstorming. We're gonna have the top people in Hervé's organization in brokerage, and we're gonna have the top people in our organization, freight brokerage, all get in a workshop, all get together and spend a few days brainstorming together and just take a blank slate, a clean slate, and say: How can we approach the market in a more effective way? What are some ideas for growth?
What kind of cross-fertilization and best practices can we do to better serve customers and access purchased transportation better? And by the way, that's a two-way process. That's not just us coming into European and saying, "We know how to do it better, and here's how you should do it." That's a two-way process. They have over EUR 1 billion, that's well over $1 billion a year, of freight brokerage, so they obviously know what they're doing. They have a very good reputation, very effective on that. So we're gonna learn a few things from them as well.
Okay, makes sense. Great. Thanks for your time this morning, and best of luck. Congratulations.
Thank you, Kevin.
The next question is from John Mims with FBR Capital Markets.
All right. Thank you, and congrats again on this transaction. So-
Thank you, Mr. Mims.
Brad, let me ask a strategy question, just a slightly different way. I mean, with this closing, you'll be in the top ten of global contract logistics companies, and presumably, the goal from here would be to move into the top five. Can you do that by, you know, cherry-picking and finding good transactions in the developed world, looking at, you know, opportunities in U.S., Europe, Canada? Or is the next piece of this puzzle more of a developing focus, where you need to have a bigger presence in China and India and Brazil? I mean, I know there's some overlap there now, particularly as a combined company, but do you need to be a truly big global player to continue to move up that chain in terms of market share?
...So the countries you mentioned have lots of people, a lot of transportation, logistics needs. Those countries and countries in that similar category also elevate the risk level. So in the analysis of the pros and cons, going into the developing countries, when we're doing the pros and cons, the risk, the con of risk is gonna be much higher. So we would be more cautious in going deeper and longer into those countries. I don't rule it out. It could come a point in time where something in one or more of those countries makes sense, but we are much more comfortable doing acquisitions and growing in Europe within the infrastructure that we're inheriting from Norbert Dentressangle, and under very able management of Hervé Montjotin and the senior management team, all of whom are staying.
That's a much lower risk proposition than going into a brand new situation in a developing country. But I don't rule it out. It's just not a high priority for us.
Sure. No, that's helpful. That's, that's kind of where I thought you were on this. But so if I look at you, kind of where you are now and, and kind of where we think you might go from here, compare you against the Kuehne, against C.H., where you're, you know, running in the $15 billion-$20 billion in revenue, $1 billion plus in EBITDA, are those reasonable targets without taking that additional risk, or are there diseconomies to, you know, moving into that top five grouping within the next couple of years with the, you know, level of risk that you're willing to take on and, and with that quick of a growth trajectory?
So I don't wanna comment specifically on possible acquisition candidates, but in general, we keep an open mind. We are flexible. We are rigorous in our analysis, we're disciplined, we pass on acquisitions and lose acquisitions left and right that don't work for us. May work for someone else, it doesn't work for us. But if something that's out of the ordinary is intelligent for us to do and creates value for our shareholders and has manageable risk, why not? We'll pursue those things.
Sure. So $1 billion in EBITDA is on the table?
Why not?
Three years?
Don't wanna nail it down to years. As Scott said before, we wanna do a more careful analysis of what our next few years is gonna look like. We wanna spend more time with Hervé and his team, doing a bottoms-up budgeting analysis up for a multi-year basis, and stress testing it on best case, worst case, likely case scenarios. And then we'll come to the Street and say, "Okay, here's what our new financial targets are." We've been really careful what targets we've put out since 2011. We've been very fortunate that we've met all our targets, and not a whole lot of companies can say that. So we, and one of the reasons we've been able to do that, is we've been really careful with what we say publicly. So we don't wanna do that in a quick way.
We wanna do that in a careful, methodical way, but we will update the future numbers for you.
Right. I know, I know. I knew you weren't gonna put something out there, but that does kind of beg the question, what was in your original 2017 $575 million target? You know, 'cause obviously, it was well below kind of, you know, what we're looking at right now.
Yeah, John, it's Scott. Our, our original target was $200 million in EBITDA, and people were very uncomfortable with that. They said, "200 million in EBITDA by 2017. How are you gonna get there?" We did move it up through the years. The 575 did include another $2.75 billion in purchases in acquisitions, and then it included 12%-13% growth.
Right. Yeah, it just came out earlier. Okay, cool. Thanks again. Thanks so much.
Mm-hmm.
Thank you.
The next question is from Scott Schneeberger with Oppenheimer.
Thanks, and congratulations, everyone. Brad, you alluded to looking at Jacobson earlier and losing out to Norbert. And could you discuss just specifically the New Breed and Jacobson integration and opportunities that you have there, and perhaps a little bit more elaboration on the org chart there? Thanks.
Yes. Nothing is set in stone there. The die has not been cast yet. We have an amazing contract with just this organization in the former New Breed, with amazing management that is just spectacular. Jacobson was something that we had our eye on for a long time, and we were extremely disappointed that we didn't get it. Although it was a blessing in disguise because it introduced us to Norbert Dentressangle, we're still very disappointed we didn't get Jacobson. One of the reasons that we're excited about buying Jacobson is, Scott Temple is a really good manager, and he's got great managers under him, and we don't wanna lose any of those guys. We wanna figure out a way that we can combine the companies, put them together, and everyone be happy, both employees and customers and shareholders.
And there will be a way. But we do not have a preconceived, exact organizational chart. We got to get everyone in a room and figure it all out. But boy, if we can't figure out how to put the former New Breed and the former Jacobson together and make a unbelievably even better company, then we're in the wrong business.
Thanks. I imagine that integration, you know, pending approvals and everything, will go fairly rapidly. It will be your first big integration and contract logistics. What type of synergies do you view there?
Don't know yet. We want to-- But let's-- We have to do the business plan first. We've got to do the organizational chart first. We've got to make everybody happy, and that'll be something that, you know, I'm very interested to hear what Louis proposes, and, because I trust his judgment, and I'm sure, he's gonna take an enormous amount of input from Scott Temple, who's a very, very good executive running Jacobson. And, once we've got the strategy down, once we've got the-- what it looks like-... Then we can tell you what kind of synergies are there, what kind of cost savings are there. Too early in the process to say that right now.
Great, thanks. Appreciate it. One last one for me. I'm swinging it back over to Europe. Could you, elaborate on the e-commerce capabilities of Norbert? Curious to hear about that. Thanks.
Yeah, on e-commerce, Scott, Norbert is a large player in e-commerce, e-fulfillment in Europe, one of the leading players. And by being so large, they have capabilities that others don't, especially with regards to reverse logistics. So on e-fulfillment, you're not only getting the goods out for an e-commerce provider, it's also the reverse piece, which has a lot of different pieces to it. We do a good amount of reverse logistics in what was formerly New Breed, in XPO Supply Chain Solutions in the U.S., and it's one of the most value-add things we do. And the larger you are, you gain capabilities, efficiencies to help e-commerce providers in better ways.
Great. Thanks again.
Thank you.
The next question is from John Larkin with Stifel.
Good morning, everybody. Congratulations.
Good morning, Mr. Larkin, and I want to make a comment to you, John. Thank you for writing last week that you were concerned that we might not be able to hit our target of $1.5 billion of revenue acquired this year, and I hope we've pleased you and satisfied that concern.
Well, that's called prescience, prescience in reverse, I think. But move on. Europe is quite a bit different than the U.S., in particular in the labor arena. I noticed that in the press release, you mentioned that there would be no reductions in labor force, at least in France, over the next 18 months. Are you somewhat hamstrung in terms of what you can do on the labor front if there were to be an economic downturn again? Or can you explain to me how you plan to manage the labor situation, which is quite a bit less flexible in Europe?
We do not plan to lay off anybody in terms of the total headcount. I mean, there'll be natural attrition of, you know, people quitting and for performance and then replacing them with the replacement. But the overall headcount will stay the same or will go up, and that's the business model here, and that's what we're committed to. So if we're wrong about the Eurozone rebounding, and I don't think we are, but if we are, then it will be a productivity challenge. It won't be. The solution won't be in firing people. That's not what this is about. That's not our intention whatsoever.
Thank you for that. And then maybe one other question on the U.S. landscape. There have been probably more large asset-light properties on the market in the last 18 months than there have been in many years. And a lot of those transactions are going to either strategic or financial buyers at EBITDA multiples that are a little bit stretched up in the, let's call it, the 10-15 range. And it seems historically that perhaps you're a little uncomfortable living in that kind of valuation range and would prefer single-digit multiples like you have here with Norbert. Any comments on how challenging the U.S. market is from a valuation point of view?
There's a reason why we don't like to pay, you know, mid-teens EBITDA multiples. Because when you look at historically over the last 20 years, and you look at what deals worked and what deals didn't work, a much higher percentage of deals didn't work that were at those teens multiples than ones that were in up to 10x EBITDA. It seems to be a sort of cutoff right around there. So from a risk point of view, paying more than 10, 11 x EBITDA, just mathematically, statistically, looking at big data, shows that the risk goes up of it not working. That said, again, we're open-minded, we're flexible, we're dialectical, we're willing to be proven wrong.
We're open-minded, but in order to pay a multiple, like the kind of multiples you were talking about, we would have to be very confident that the growth rate of the company we were buying is for sure. It would have to be a very special opportunity, an almost unique opportunity, a very high growth with a clear line of sight and something that we were extremely comfortable is gonna grow to justify that kind of a multiple. Is that other dozens of companies that we'd be willing to pay those multiples for? No, there's not. Could there be a small group of companies that we conceivably could get comfortable, are crown jewels that are worth it? Maybe, maybe not. Don't know, but we'll keep an open mind.
Good answer. Thank you. And then maybe one quick one on the management team at Norbert. You said virtually everybody is going to be staying. Will they be in some sort of equity compensation-related program? Will they own XPO stock? How are you gonna make sure you lock those folks in?
Absolutely, and you're hitting on a really key point. One of the other reasons, in addition to the ones I said half an hour ago, acquisitions fail, is because you don't get the management team's head in the game. And the best way to get their head in the game is align their financial interests, and that's exactly what we've done. So we have already signed management agreements and non-competes and RSU packages in XPO stock with the senior management, and everybody's head is totally in the game, and our interests are aligned.
Thanks very much. That's all I had.
Thank you, John.
The next question is from Todd Fowler with KeyBanc Capital Markets.
Great, thanks. Congratulations, and I guess thanks for not doing the whole call in French. But I guess, Brad, where I wanted, I would have had a tough time with that. I guess, Brad, if you can give some specific examples of where you see the greatest revenue synergy opportunities. Is it mostly with Norbert's customers using some contract logistic services here in the U.S.? Is it on the freight forwarding side? Is it something else with the existing XPO customer base going into Europe? If you can kind of talk a little bit more about where you see the revenue synergies, I think that would be helpful.
Yes. We can answer that call with greater granularity and with concreteness on our earnings call next week, but because between now and then, we will have had contacted all of our customers at the respective companies and asked that exact question, "What kind of needs do you have on the other side of the pond that we can help you with?" And I'll give you a specific, a concrete answer to what part, which service offerings, and which way, going this way or going that way, is, has the most opportunities. But right now, it'd be a little bit hypothetical.
Okay. I mean, do you care to just take a high level, you know, kind of first take at it, or what we should think about, or just wait for next week?
Well, clearly, in freight forwarding, we're a whole new company, being a $425 million business rather than a $200 million business. So there'll be definitely opportunities there. And, cross-selling on the contract logistics side will be more on the level of we have an entree into customers that we have great relationships with, that go a long ways back, and they're doing business in Europe, and for one reason or another, Norbert has not been, and they have a huge opportunity by doing business with companies going the other way. So I think, my conjecture is there's gonna be a huge amount of opportunities there as well. So I don't see any part of the supply chain that we're disadvantaged by, by being a global supplier, and I think in each one of the areas, we'll have an advantage.
I'd like to give you concrete, specific, factual answer next week once we've actually talked to our customers.
Sure. Okay, that's fair. And then just for my follow-up, you know, you and I have spoke for several years at this point about, you know, the infrastructure that you've put in place to build a much larger organization, you know, with the combined companies, you're kind of approaching your, your prior 2017 targets. You know, how do we think about, you know, the amount of revenue and EBITDA that your infrastructure can handle? Is it something that can be, you know, twice where you're running or where the pro forma would imply? And what sort of investment could you have to make, from an infrastructure standpoint as the company continues to grow?
Yeah. Our infrastructure, and that's really the $65 million or so—$60 million or so in corporate infrastructure, is large enough to handle a much larger company, even than the size we are today at $8 billion. We'll need to add some in accounting and some in help desk and technology, but our, in general, our technology staff is fully built out. Our finance staff, you're talking about little additions here that's not gonna really move the needle. The senior management team, the recruiting, the training teams are fully built out. When you take a look at what we've built, we've put all of that in ahead of plan, so we'll continue to get leverage on that.
Okay. And same thing with the accounting or financial system, Scott?
Yeah, in the accounting, you'll just add some AR people, some AP people. You're talking small numbers here. This is not-
Okay.
These are not big. This has been fully built out.
Okay. Thanks for the time this morning, guys. Congratulations again.
Thank you, Todd.
The next question is from Donald Broughton with Avondale Partners.
Good morning, Brad. Good morning, Scott. Good morning, everyone. Congratulations. I'll add my congratulations to the list.
Thank you, Donald.
As I look at this transaction, it almost seems sycophantic to say, you know, this is transformative, and it makes you almost a full service. You pick a poison, tell me what it is you need accomplished on the logistics side of your business, and I can handle it—I can handle it globally, kind of a transaction. But when I look carefully at this, I mean, the warehousing, the inventory management, the order fulfillment, the reverse logistics, the value-added services, all of that downstream that you can handle with this as a result, that's both transformative as well as I think it's the risk.
I mean, correct me if I'm wrong here, you'll end up with, what, 140 warehouses in the U.S. and 280-something facilities in Europe, in the EU? Is that right?
We will have one of the largest contract logistics footprints of any company. We will have 129 million sq ft of warehousing facilities to serve our contract logistics customers. So we will have a very fulsome service capability that very few competitors have. So I view that as a plus.
Well, it's a huge plus in the fulfillment of those services. I understand that completely. The question is, because watching you guys carefully for a while now, I know that you're always careful to make sure that your... The acquisition of assets when you make them is matched carefully to the revenues that are coming, the services you're providing. Are these warehouses and all these facilities? They're not leased. These are owned. Is that correct?
Oh, no, no, no! Most, the vast majority of them are leased, and the vast majority of them are leased for periods that are concurrent with the business that underlies them.
So it's just dependent upon you to make sure the service is there and you manage the risk by making sure the customer is happy the way you go?
Absolutely. You got to remember the history of Norbert Dentressangle. This is a company that, sure, it was public, but it was two-thirds owned by an individual's family, and it was built up step by step in a very conservative way, in a very methodical way, a very precise way. Very much focused on risk management, very much focused on the details operationally of matching up opportunities with risk and making sure everything was very prudent. So they're, and in contract logistics, that's one of the things that some players over the years didn't get quite right. In terms of Norbert Dentressangle, and in terms of Jacobson, in terms of the former New Breed, these were all organizations that have got it right on their own two feet, independent of the other two of those three.
We're in good shape with a lot of industrial knowledge, a lot of institutional expertise in terms of that.
Yeah. Well, it's funny what you said about Jacobson, because I always thought that was a company you should acquire, and so you confessing that you were indeed looking at them made me smile earlier in the conference call. So this basically gives you, you know, any of your customers, you just basically offer them a full menu from order, from the moment the call center takes an order to the moment, you, God forbid, there has to be reverse logistics in both the U.S. and the EU. That's basically what this provides you, isn't it?
Correct. Exactly. Exactamo.
Perfect. Thank you. I'll let someone else have the floor.
Thank you, Donald.
The next question is from Jason Seidl with Cowen and Company.
Thank you. Good morning, guys, and congratulations. Two quick questions. You know, Brad, you talked a while back a little bit about how in Europe there's been fewer buyers and lower multiples. Obviously, this is going to increase the profiles for potential European deals going forward. How do you see that shaping out as you're looking to sort of use Norbert as a platform for further growth?
Good point. There would as a result of us doing this transaction, we've obviously raised the profile of the attractiveness of the European market. There will be private equity and strategic companies that will pay more attention now to what we're doing in Europe, just as they paid more attention to what we did in last mile, what we did in expedite and intermodal, et cetera. The thing is, you need a platform in order to pursue the vast majority of the companies on the target list that we've now jointly developed over the last couple weeks. So it's going to be a little— there is a barrier to entry here.
There is a moat from an acquisition point of view of, if you've got an infrastructure already, if you're strategic with a nice infrastructure and you can merge a company in, there can be synergies, and one plus one equal more than two. But I don't see a lot of companies that fit that bill and also have an acquisition appetite. So I don't see, I could be wrong, but I don't see suddenly it getting much more competitive here, multiples going up. I don't feel that. I could be wrong, but I don't think so.
Okay. Well, that's great color. Next question, a little bit more, maybe Scott could help out here. What do you, what do you see this deal, Scott, doing for the, for the tax rate going forward for the company?
Well, the tax rate that Norbert is paying is a little bit lower than what we're paying in the States. You know, we still are sitting on a large NOL in the U.S., and so we'll continue to use that up there. And you know, depending on, you know, I think relative to the, you know, other than the NOL, I think the tax rates will stay, you know, relatively static. And we haven't dug into the structure from a tax perspective in enough detail to really have a very detailed answer to that question. But as of right now, that's a good starting point.
Okay. Appreciate the time, as always, gentlemen, and again, congrats.
Thank you, Jason.
The next question is from Casey Deak with Wells Fargo.
Casey?
Hey, thanks. Wanted to go back to Jacobson a little bit. Do you guys anticipate any retention issues there with any person now? It's now gonna be two integrations for the company in about a period of six months. And maybe you can comment on where they are in the integration there on the Norbert side, and if they're in the midst of a technology implementation, or how that's gonna trend.
I'd like to pass the podium to Hervé to answer that.
Okay. Thanks, Brad. Hello, everybody. Just to share with you that the Jacobson integration within Norbert went very well for a very simple reason, that the reason was, we used Jacobson as our own platform for the U.S., as Jacobson was a very efficient, well-run business. So we roll over our Norbert brand, we roll over some tools and controlling tools, but on the... We can say now that the integration is over. So for these guys, it's just the opening of a new game. They are flexible, they are realistic, they are American, and I think they consider that it's an interesting game. So it's not a big deal to move from Norbert to XPO rebranding.
Okay. And just to go along those lines, with the contract logistics business, that is Norbert, that was Jacobson as well, is there a portion of that that is the multi-tenant facilities that's on that lower value pick and pack, or is it all gonna be your higher value-added services that you've focused on at XPO?
The vast majority of everything we do in both companies is high value add. So, the focus is on refrigerated, which is in food and bev and in pharmaceuticals, where there's a lot of requirements and a lot of value add. Another area is chemicals, where there are a number... It's just the same kind of thing. It's just a lot of requirements, a lot of know-how, a lot of regulations that require a high level of value-added services... Third biggest area of thing is e-commerce, and growing very fast. We grew over 30% last year in Norbert. And when you look at e-commerce, the bigger size you are, you can handle that reverse logistics, which is very technical, which is, there's a lot of different pieces to it and complicated.
So the businesses that Norbert have and that XPO have are very much value-added. They tend to be higher margin. They tend to be longer term relationships, long-term contracts, and that's why they're able to get 97% contract renewal rates. At XPO, we have 99% contract renewal rates, because it's so important to what those customers do.
Okay. Thank you very much.
Thank you very much. Let me conclude this call by briefly describing the company that XPO will be, post this acquisition. We will be one of the world's largest contract logistics providers. Contract logistics is a business that has long-term relationships with customers and has high value add and has high barriers to entry. It's non-commoditized. We will be the third largest provider of intermodal services in North America, a sector that is growing from the conversion from over the road to rail for long-haul freight. We will be the second largest freight brokerage firm globally by net revenues. We will be the largest provider of last mile services for heavy goods in North America. We will be the number one manager of expedited freight shipments. We will be a leading provider of forwarding services across air and sea. We will be a leading e-commerce fulfillment organization in Europe.
We will be a company that has a true global footprint and has a very compelling value proposition for our multinational companies. With that, I'd like to thank you for your support, and we'll be talking to many of you between now and our earnings call next week, and look forward to talking to you on our earnings call next week. Thank you very much.