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3PD's acquisition ‘strengthens position'

ATLANTA - It only took Karl Meyer and his team at 3PD Inc. about a decade to make the company the largest provider of last-mile, heavy goods delivery services, but Meyer is convinced the growth has just begun.
     He believes the company, which had revenues of $312 million in the year ended May 31, can be a $1 billion business by the end of 2016. And the company's recent acquisition by freight forwarder XPO Logistics provides more than enough fuel to drive that growth, Meyer says.
     "It's a very fragmented business," Meyer said of the $12 billion last-mile delivery segment. "There is going to be a lot of consolidation ... and this acquisition will certainly strengthen our position."
     Meyer, a former Home Depot executive who founded 3PD in 2001, said his company currently generates about 27% of its revenues from furniture deliveries, and he believes that portion of the business will increase as e-commerce retailers grow their sales of heavy goods.
     "The e-commerce people are starting to realize they can't rely on FedEx and UPS for all their shipping," he said. "(Furniture and other heavy goods) represents a great growth opportunity for them."
    Plus, he believes more traditional brick-and-mortar furniture retailers will be looking to outsource delivery operations in the next few years, noting that only 30% of all heavy goods deliveries currently are outsourced to third-party providers such as 3PD.
     "We can help them reduce inventory. And we have to protect their brand in the eyes of the end consumer," said Meyer, noting that most consumers won't know if their furniture is being delivered by a third-party provider or the retailer itself.
     Meyer said 3PD currently has about 650 employees at 47 offices across the country (including 24 that were established for specific customers) and three call centers. Most employees, however, work in operations or customer service posts, and he's excited that his company's services are being added to the portfolios of XPO's 850 sales associates.
     That will expose 3PD's offerings to thousands of potential customers. In turn, XPO's expertise in freight forwarding will be available to existing 3PD customers.
    "We bring a lot to the table from a technology standpoint ... and XPO has more than 22,000 carriers in its brokerage network," Meyer said. "Combined, we can offer more and more services to our customers."
     For publicly traded XPO, the acquisition of 3PD was its fourth major deal of the year, and the company has made it clear that it will do many more acquisitions on its way to becoming a $4 billion to $6 billion company in three to five years.
     XPO had revenues of $278.6 million for the calendar year 2012, but already had racked up revenues of $251.1 million for the first six months of 2013 - and that's not counting any revenues from 3PD.
     The 3PD deal also should help XPO's bottom line. Like most fast-growing companies, XPO has recorded operating losses in recent years, but the company said 3PD has gross margins in excess of 30% and adjusted EBITDA margin (earnings before interest, taxes, depreciation and amortization) of more than 10%.
     "3PD is the clear market leader, with an impressive growth trajectory," said Bradley Jacobs, chairman and CEO of XPO. "We intend to scale up the business and capitalize on the rapidly growing demand for last-mile logistics."

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