Key Highlights

● C.H. Robinson finished as the S&P 500's worst performer after announcing its $5.8 billion acquisition of RXO.

● RXO shareholders get $17.25 in cash plus 0.0856 C.H. Robinson shares, worth $30.25 per share under the deal terms.

● C.H. Robinson is pausing share buybacks and raising about $3 billion in new debt to fund the purchase.

C.H. Robinson shares tumbled on Monday after the freight broker agreed to buy rival RXO in a cash-and-stock deal valued at about $5.8 billion including debt.

A big bet on trucking, and a big drop

C.H. Robinson Worldwide (NASDAQ:CHRW) tumbled on Monday, Oct. 5, finishing as the worst performer in the S&P 500. The closing price was put at $141.34. Reports differed slightly on the exact size of the slide, but every account agreed it was the steepest fall in the index on the day.

The trigger was a deal. C.H. Robinson agreed to acquire truck broker RXO (NYSE:RXO) in a cash-and-stock transaction valued at about $5.8 billion including debt. The combined company would be worth about $25 billion.

RXO investors cheered. Their shares surged, closing around $28.65.

The terms of the deal

Under the agreement, RXO shareholders will receive $17.25 in cash plus 0.0856 of a C.H. Robinson share for each RXO share they own, worth $30.25 per share based on the deal terms. Holders can also elect all-cash or all-stock consideration. The boards of both companies approved the deal unanimously, and RXO's largest holder, Orbis Investments, supports it. MFN Partners, another large RXO holder, also backs the deal.

C.H. Robinson plans to raise about $3 billion of new debt to fund the purchase. Management is targeting $300 million in annual cost synergies within two years and expects the deal to add to adjusted earnings per share within nine months of closing. The transaction is expected to close in the first half of 2027.

Chief executive Dave Bozeman called the merger "a natural next step in our transformation, allowing us to create a more scaled, resilient North American third-party logistics provider."

RXO chief executive Drew Wilkerson said: "Joining C.H. Robinson represents an exciting next chapter for our company, our employees and customers."

Why the market pushed back

Acquirers often fall when they announce large deals, and this one comes with costs that investors can see right away. C.H. Robinson is pausing share buybacks until its leverage falls back to between 1.75 and 2.25 times adjusted EBITDA. That removes a source of support for the stock while the company digests the debt.

Reports also noted that the deal could draw regulatory review, since C.H. Robinson is North America's largest freight broker. The agreement includes a $175 million termination fee owed by RXO if certain conditions block the deal from closing.

C.H. Robinson is also a member of the Dow Jones Transportation Average, so its slide weighed on transport stocks.

A mixed market backdrop

The wider market was firmer. The S&P 500 added 51.23 points to 7,773.95, just shy of its summer record. The Nasdaq Composite climbed 286.45 points to a record 27,477.31, and the Dow rose 90.94 points to 51,267.90.

Monday was a busy day for deals. Schneider Electric agreed to buy PTC (NASDAQ:PTC) for $205 a share in an all-cash deal, sending PTC soaring to the top of the S&P 500.

The 10-year Treasury yield rose to its highest close since 2002, a headwind for companies taking on new borrowing. At the same time, Friday's weak jobs report, showing only 29,000 jobs added in September, cut bets on an October Federal Reserve rate hike.

What to watch

Investors will look for more detail on financing and the regulatory timeline as the deal moves toward an expected close in the first half of 2027. The Federal Reserve releases minutes of its September meeting on Wednesday, Oct. 7, at 2pm ET, and Delta Air Lines reports on Friday, offering another read on transport demand. C.H. Robinson's next quarterly report will be the first chance for management to update investors on deal planning.