UPDATE 3-Jacobs puts $150 mln into Express-1, aims big

Tue Jun 14, 2011 6:02pm EDT

* Jacobs to take over as CEO, biggest shareholder

* May switch listing to Nasdaq

* Will grow business through acquisitions

* Express-1 shares up 11 pct to 4-mth high (Adds comments by Jacobs)

By A. Ananthalakshmi

BANGALORE, June 14 (Reuters) - Entrepreneur and investor Bradley Jacobs and his private equity firm are to invest $150 million in Express-1 Expedited Solutions Inc XPO.A, a third-party logistics provider, and aim to build "a multibillion-dollar" business over the next several years.

Jacobs, who will be the majority shareholder of Express-1, which has a market value of $72 million, said he plans to increase the business through acquisitions, adding he is looking at small and big companies in freight brokerage and freight forwarding.

"We're going to start off buying some small and medium-size companies but over time the plan is certainly buy some larger companies as well," he told Reuters in an interview.

"I've been meeting with roughly 100 acquisition candidates over the last two months and they are of all sizes, I've looked at companies as little as $10 million to $20 million in revenue, and I've looked at companies approaching $1 billion in revenue."

Jacobs has a solid track record in founding small companies and building them, through acquisitions, into market leaders.

In 1997, he started United Rentals (URI.N) and, some 250 acquisitions later, turned it into the world's largest equipment rental firm. Private equity firm Cerberus Capital Management offered $6.6 billion for the company in 2007, but this bid was later withdrawn.

United Rentals is currently valued at $1.37 billion.

Jacobs also founded United Waste Systems, a leading U.S. garbage collector, which he sold to a rival for about $2.5 billion in 1997.

Jacobs, hunting for targets to go build another large company this time around, looked at several industries including government services, healthcare and education before settling on transportation, attracted by consolidation opportunities in the highly fragmented sector.

To tackle the global logistics market, Jacobs will take over as CEO of Express-1 and sweep out current management. Only the chairman, Jim Martell, will remain on the board, Jacobs said.

The international freight forwarding market is estimated to be worth $150 billion, with the 10 largest firms combined having only a 40 percent market share.

"I want this to be a multibillion-dollar company within several years," Jacobs told Reuters. "The industry is big, and I'm planning on creating a very big company."

Jacobs said he may also switch Express-1's stock listing to Nasdaq from the Amex exchange.

Express-1 shares jumped more than 11 percent on Tuesday to a 4-month high of $2.44.

Senior management roles will change, Jacobs said, with current CEO Mike Welch staying on to help with the acquisition strategy.

The new investors will receive preferred stock, convertible into 43 million Express-1 shares at $1.75 each, and warrants to purchase an additional 43 million shares. The company will effect a 4:1 reverse stock split once the deal closes.

Jacobs Private Equity will own 71 percent of Express-1 once the deal closes and the preferred stock is converted and warrants exercised.

Deutsche Bank Securities and UBS Investment Bank advised Jacobs. BB&T Capital Markets were financial advisers to Express-1. (Reporting by A. Ananthalakshmi in Bangalore, additional reporting by Soyoung Kim in New York, Editing by Ian Geoghegan and Matthew Lewis)

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