(Reuters) - XPO Logistics Inc (XPO.N) said it would buy Pacer International Inc (PACR.O) for $335 million, bolstering its intermodal shipping business to take advantage of the booming trade between the United States and Mexico, sending its shares up 10 percent before the bell.
U.S. rail and trucking companies have invested heavily to build up their intermodal business, which cuts fuel costs by 15-20 percent by moving goods in standardized containers using trucks, trains and ships.
These transportation companies have also focused on expanding their services to Mexico, where the booming manufacturing sector has helped make imports cheaper compared with China and other countries.
The acquisition of Pacer, the largest provider of intermodal services between the U.S. and Mexico, would make XPO the third-largest North American provider of such services, the two companies said in a statement on Monday.
The deal, XPO's eleventh in two years, will help the company grow its freight brokerage business, which houses the intermodal business.
Revenue at the business quadrupled to $125.1 million in 2012, making up about 45 percent of total revenue.
Pacer, founded in 1997, gets about 80 percent of its revenue from intermodal shipping and handles about 10 percent of all such freight movement in the United States.
DEAL DETAILS
XPO's offer of $9 per share -- $6 in cash and the rest in stock -- represents a premium of 8 percent to Pacer's Friday close of $8.33.
XPO said the deal is expected to double annual revenue to about $2 billion and add to earnings immediately after closing, which is expected in the second quarter this year.
Greenwich, Connecticut-based XPO said it would finance the purchase partly with a loan from Credit Suisse AG.
Credit Suisse Securities (USA) LLC is financial adviser to XPO, and Wachtell, Lipton, Rosen & Katz is legal adviser.
Morgan Stanley & Co LLC is serving as financial adviser to Pacer, and Winston & Strawn LLP is acting as legal adviser.
Pacer's shares were trading at $9.10 in premarket trading, while XPO was trading at $30.75.
(Reporting by Sruthi Ramakrishnan and Sagarika Jaisinghani in Bangalore; Editing by Supriya Kurane and Savio D'Souza)
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