Brad Jacobs Backs C.H. Robinson's $6 Billion RXO Acquisition

C.H. Robinson's roughly $6 billion acquisition of RXO just won a public endorsement from the man who created the brokerage: Brad Jacobs, who told the FreightWaves Future of Freight Festival in Chattanooga that success in truck brokerage demands "scale and density."

Jacobs, who as CEO of XPO Logistics spun RXO off into a standalone publicly traded 3PL in 2022, was quick to distance himself from the transaction itself. "This is not my deal," Jacobs said. "That was (RXO CEO) Drew Wilkerson's deal and (C.H. Robinson CEO) Dave Bozeman's deal."

In one sense, though, the deal traces straight back to Jacobs. It was his decision to break up the XPO conglomerate, leaving XPO as a stand-alone LTL carrier and creating two separate companies: RXO in 2022 and GXO, a contract logistics business, in 2021.

Why bigger wins in brokerage

Jacobs argued that scale matters commercially because speed of matching trucks and freight decides margins. "You've got to be able to find a truck faster than the other guy," he said. "You've got to find freight to get that backhaul right this second. So bigger is definitely better there."

He also backed the deal's structure, which lets RXO (NYSE: RXO) shareholders choose their payout mix. Under the terms, RXO shareholders receive $17.25 per share in cash plus 0.0856 shares of C.H. Robinson (NASDAQ: CHRW) stock per RXO share — a package C.H. Robinson valued at $30.25 per share at announcement. Holders can instead take an all-cash payout of $30.25 per share or an all-stock payout of 0.1992 C.H. Robinson shares.

"I like the part that it was a big chunk in stock," Jacobs said. "That way the people can share in the synergies."

Warm words for Wilkerson

Jacobs reserved his strongest personal praise for Drew Wilkerson, the RXO CEO selling the company he runs. "You know what I like about him?" Jacobs said. "I've known him for awhile. He's totally honest. He never once told a lie. Never told a fib. Never exaggerated. This is a humble thing. It a really beautiful quality of human being. I look for people like that." He also called Wilkerson a "really nice guy."

After a brief on-stage interview with FreightWaves CEO and founder Craig Fuller, Jacobs fielded audience questions on topics ranging from dealmaking to autonomy.

How XPO came together — and came apart

Jacobs said his original XPO plan was "to form the biggest trucking company that's ever existed, and just go buy a bunch of trucking companies, form a relationship with OEMs and hire a bunch of drivers." He abandoned that path after concluding that asset-heavy truckload had limited upside. A shipper, he said, doesn't care whether the carrier owns one truck or 10,000: "Like all you need is that one truck."

Pivoting to brokerages, he found "they weren't cheap. They were fairly expensive." The revised plan built the XPO conglomerate instead, but the market discount frustrated him. "We didn't get a good multiple because investors didn't want to buy a conglomerate," Jacobs said. "They wanted to buy something that was more simple to understand. So we broke it up…at a huge value."

Autonomy's open questions

A trucking sector powered mostly by autonomous vehicles will be "more efficient because it's going to be more Uber-like in terms of spot business," Jacobs predicted, with spot taking a rising share of linehaul and cutting a market that still has "a lot of deadhaul, still a lot of empty freight." But he flagged unresolved ownership questions as asset-light models grow: "Who's going to own all these trucks? Is it going to be the government? Is it going to be just the network? Is it going to be individual people? Is it going to be big, huge corporations? I don't think that's figured out."

QXO and the building products bet

Jacobs stepped down last year as chairman of both XPO and GXO to focus on QXO (NYSE: QXO), his roll-up play in a building supplies market he calls inefficient. QXO has made three acquisitions and booked revenue just under $5 billion in the first six months of the year, with Jacobs serving as chairman and CEO.

"I looked at 55 different industries before I picked building products," he said. Most of those industries, he told the supply chain audience, "are way behind the supply chain world in terms of technology and efficiency, in terms of real basic stuff like scanning and having a TMS." The supply chain, by contrast, is "more advanced than you think."

Wall Street hasn't embraced QXO yet: the stock is down about 41% over the past year and 14.4% in the past month. Jacobs showed no doubt about the model. Building products "are not going away," he said — ten years from now people will still "sleep in a real bed with real windows and real doors and real plumbing." That durability, he argued, invites consolidation: buy companies, strip out unnecessary costs, run them more profitably and more customer-centric with technology, "and then make yourself the best provider of what they want to pay for."

Do smaller brokers have a future?

Asked about broker consolidation — a question prompted by RXO's absorption into C.H. Robinson and Echo Global's acquisition of ITS earlier this year — Jacobs said "the smaller brokers still do just fine." Big brokers have predicted their demise for years, he noted. "If you talk to the bigger brokers, they all say the little brokers are going out of business," Jacobs said. "They've been saying that forever, and they're still there."

His endorsement of the RXO-C.H. Robinson combination, paired with that defense of small brokers, points to a market where scale confers matching speed and synergy capture at the top, while niche operators keep competing below — a structure the RXO deal's $30.25-per-share price is now testing in public markets.