America's largest freight broker C.H. Robinson Worldwide is buying rival RXO in a stock-and-cash transaction valued at $5.8 billion.
C.H. Robinson CEO Dave Bozeman told the WSJ Logistics Report's Paul Berger that the acquisition will expand his company's expedited and last-mile delivery services. The deal will generate about $300 million in annual savings within two years of its close, the company said. Shares of (RXO) surged by more than 20% on Monday, while C.H. Robinson's dropped by nearly 11%.
Eden Prairie, Minn.-based C.H. Robinson has been one of the leading logistics firms to employ AI to manage cargo, using fewer workers during a prolonged freight sector downturn. The company's labor expenses in the second quarter were 25% lower than the same period in 2022 on a 36% reduction in head count, according to UBS analysts. C.H. Robinson says gaining access to RXO's data set will improve the speed and precision of its AI models.
Robinson and RXO reported combined gross domestic transportation-management revenue last year of $17.4 billion, or almost 14% of the market, according to Armstrong & Associates. The deal is expected to close in the first half of next year and will create a logistics company with an enterprise value of more than $25 billion.
"If Robinson achieves its savings target, it will be significantly more challenging for companies like TQL, J.B. Hunt and other mid-sized brokers to compete on price." Armstrong & Associates CEO Evan Armstrong
Energy
The U.S. will temporarily permit the highway use of dyed diesel, a tax-exempt fuel typically used for farming, the Journal's Collin Eaton writes. President Trump's executive order aimed at bringing surging prices of diesel down will defer a federal tax of 24.4 cents a gallon on the fuel through the end of the year.
The move comes as ships are ferrying almost as much crude oil out of the Strait of Hormuz as they were before the Iran war, but are barely moving any barrels of critical diesel fuel.
The administration is putting pressure on its allies abroad, too. The G-7 on Friday agreed to release 100 million barrels of crude oil and fuel from their emergency stocks. They also declined to restrict exports of diesel and other products, an option Trump had said he was considering as a way to keep more fuel in the U.S.
Number of the Day
36%
Portion of U.S. original equipment manufacturers that have reshored some production or are engaged in doing so, up from 29% last year, according to a poll by the Reshoring Initiative and Regions Recruiting (SupplyChainBrain)
Maritime Security
Persian Gulf oil producers are paying up to $40 million for a round trip for shuttle runs to move crude through the dangerous Strait of Hormuz, the WSJ's Rebecca Feng writes.
For the oil producers, it is worth it, because leaving the crude stranded is economically worse than taking on the freight cost and selling at thinner margins. So they have turned to hiring very large crude carriers to complete a perilous journey known as a shuttle run. Carriers enter the Gulf via Hormuz, load at ports there, exit from the strait, then transfer the oil to another vessel waiting just outside of the waterway.
Shipowners are reaping some of the best returns the industry has seen in decades; and the sailors who make the dangerous crossing are being paid like never before. Those financial rewards come with substantial risks. Seven ships have been hit since Sept. 28, according to the U.K. Maritime Trade Operations. A few of those tankers have been identified as shuttle tankers, according to maritime-security firms.
-- Saudi and Yemeni forces launched a counteroffensive to oust Houthi rebels from the strategic port city of Mokha, while the Houthis struck two Saudi airports. (WSJ)
-- Saudi Aramco CEO Amin Nasser said global oil inventories have been sharply depleted and could take up to two years to rebuild. (WSJ)
In Other News
-- The Institute for Supply Management's services PMI fell to 54.9 in September from 55.4 in August, indicating a slower pace of expansion. (WSJ)
-- German factory orders fell by a sharper-than-expected 10.6% in August. (WSJ)
-- Eurozone retail sales volumes rose 0.1% in August, swinging from a 0.6% decline in July. (WSJ)
-- Germany and France are proposing that the EU lower its bar for blocking Chinese imports, setting the stage for a confrontation with Beijing. (WSJ)
-- Centalion, the commodities trader formerly known as Gunvor, bought a collection of natural-gas assets from Silver Hill Energy Partners in a deal valued at around $1.5 billion. (WSJ)
-- L'Oréal has engaged restructuring advisers to explore options for U.S. legal liabilities stemming from its use of talc and other chemical ingredients in some of its cosmetic products. (WSJ)
-- New York's Metropolitan Transportation Authority said tariffs could add up to $1 billion to the cost of new subway cars, equipment and buses. (TrainsPRO)
-- The first shipment in four years of potash from Belarus to the U.S. is expected to be unloaded in New Orleans later this month. (ShippingWatch)
-- XPO opened service centers in Arizona and Missouri, the less-than-truckload shipping company's third and fourth openings this year as it expands its network. (Transport Topics)
-- Amazon paid $195 million last week for a Chicago vertical warehouse it aims to use as a hub for same-day deliveries. (Crain's Chicago Business)