Internal discussions at Home Depot in recent months have centered around a possible acquisition bid for XPO, a publicly-traded $9 billion logistics company.
News of the discussions first reported by Recode last week saw XPO rise 14% in one day.
One main factor behind the acquisition according to a person familiar with the discussions would be to keep XPO from being bought by retail giant Amazon, which Home Depot believes is also eyeing the logistics company.
XPO calls itself “the largest provider of last-mile logistics for heavy goods in North America,” and is most known by consumers as the company that manages home delivery of items like furniture and appliances for retailers nationwide.
In 2015, XPO acquired trucking company Con-way for $3 billion. The purchase gave the company a large fleet of its own trucks to offer freight transportation services. The same year, Home Depot named the company its “Mid-Size Truckload Carrier of the Year.”
In May of this year, it was reported by the Wall Street Journal that Amazon was looking to XPO to be one of the main companies it planned to work with as it made a big push in furniture and appliance sales. Amazon was also reportedly building four massive warehouses focused on the handling of these bulky items, a sign that that the company is serious about making the move into home furnishings.
Amazon purchasing XPO wouldn’t be its first move into logistics. In October, we reported on the company testing a new delivery service that would have Amazon oversee the pickup of packages from warehouses of third-party merchants and their deliveries to customers’ homes. If implemented nationwide, the move would push the retailer deeper into those functions that are handled now by UPS and FedEx. If Amazon purchased XPO, it would only heighten fears of the retail giant more broadly encroaching on the logistics space.
Both Home Depot and Amazon currently work with XPO to deliver large home appliances and furniture, and the company has become a leader in this area as shipping companies like FedEx and UPS typically can’t deliver such bulky items.
Apart from keeping XPO out of the hands of Amazon, acquiring the logistics company would “fit like a glove” according to GBH Insights analyst Daniel Ives, as the company would bring its expertise in heavy duty freight and logistics to Home Depot.
If Home Depot does make an offer, we could potentially see a head-to-head battle between the home improvement retailer and Amazon if Amazon puts in a competing bid.
According to TheStreet, “Amazon could make a competing bid for XPO as it looks to maintain its stranglehold over last-mile delivery… Amazon has already built up a massive fulfillment and logistics network, but acquiring XPO could give it a leg up in another segment of the delivery market…”
A fight between the two retail behemoths over XPO could very well push XPO’s stock price higher over the coming months as both sides heat up.