The SEC has fined UPS $45 million for incorrectly valuing UPS Freight prior to its sale to TFI in 2021. The issue arose over the valuation of goodwill, an intangible asset reflecting factors like reputation and customer base. In 2019, UPS's internal review estimated UPS Freight's value at $650 million, significantly lower than the $2 billion estimated by an external consultant. The SEC argued that UPS should have written down approximately $500 million in goodwill, as its own analysis indicated a much lower valuation. However, UPS relied on the consultant's inflated valuation, leading to the omission of the impairment in its financial reports.
When UPS entered the $800 million deal with TFI, it did so based on the external consultant's estimate, despite having an internal valuation that suggested a lower price. The SEC claimed that UPS failed to disclose important deal terms to the consultant, which would have impacted the valuation. UPS did not admit to or deny the SEC's findings, and the fine had already been accounted for in its financial statements. While the investigation has concluded, it had no material impact on UPS’s business, financial condition, or liquidity.
Frustration with UPS Freight's performance continued at TFI, where CEO Alain Bedard criticized its practices in recent earnings calls, calling them “stupid” and “too fat.” TFI's stock has been up around 28.4% over the past year, while UPS stock saw a modest increase on the day of the SEC announcement.
Source Credit: https://www.freightwaves.com/news/ups-hit-with-sec-fine-over-its-internal-valuation-of-ups-freight-before-tfi-sale
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