FedEx (NYSE:FDX) announced its third acquisition in the last two months by taking over Brazilian transportation and logistics company, Rapidão Cometa. This 9,000 people strong company offers services through a robust base of 700 vehicles amassing annual delivery volumes of 12 million. While the previous two acquisitions were targeted at European regions, Rapidão Cometa would strengthen the company’s footings in the Latin America (LatAm) markets. FedEx stock closed 1.9% at $91 ahead of the news release.
FedEx already has presence in the LatAm and Caribbean markets with employee strength of more than 8,000 people. As this deal closes by the third quarter of this year, the acquisition will add to the company’s existing supply chain and logistics solution portfolio. While the acquisition will cement the company’s position in the Brazilian markets, it also helps that Rapidão has been FedEx’s authorized representative for the past 11 years. This long-term association will ease the integration of Rapidão’s logistics, distribution and express businesses, while FedEx can leverage Rapidão’s 17,000 client base to stimulate further growth in package volumes and increase the share of its international business.
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In addition to Europe and LatAm, the company is looking to expand in the Asian markets as well. FedEx’s express division recently announced its plans to set up a new regional hub for Asia Pacific (APAC) at Kansai International Airport in Japan. The company is bullish on Asian markets and expects the trade volume to reach $14 trillion by 2025. The North Pacific regional hub, expected to be operational by 2014, will help FedEx tap forthcoming opportunities in growing Asian markets. The company plans to fuel such growth through capital expenditures worth $4.2 billion this year, almost 60% of which are designated for growth initiatives.
Earlier, FedEx acquired French B2B express transportation company TATEX and Polish courier company Opek which have combined revenues close to $270 million. These acquisitions came after UPS (NYSE:UPS) announced its acquisition of European giant TNT for $6.8 billion. We clearly observe a difference in strategy of these two majors in terms of magnitude of the potential acquisition. While FedEx has favored a suitable mix of organic and inorganic growth, UPS has eyed a dominant shareholder in the market.
We have a $106 price target on FedEx, which represents a 17% upside to its current market price.