FedEx Weekly Update: Completes Opek Acquisition And Hikes LTL Cargo Rates

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FedEx (NYSE:FDX) completed the acquisition of Polish courier company Opek this week. FedEx has been trying to expand its presence in Europe to compete with rival UPS (NYSE:UPS), who recently acquired major European delivery companies such as Kiala and Dutch-based TNT Express. In addition to Opek, FedEx also recently acquired the leading French B2B express transportation company TATEX. The two acquisitions are expected to add $270 million to the company’s top-line.

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FedEx’s Acquisition Spree

FedEx has preferred to grow organically in Europe and has typically settled for small acquisitions. The company avoided a bidding war with UPS for the acquisition of Dutch Express Company TNT for €5 billion in March this year. Recently however, FedEx has been on an acquisition spree in Europe and Latin America. It announced the acquisition of the Polish courier company Opek in April and acquired the leading French business-to-business express transportation company TATEX in May. In late May, it also signed an agreement to acquire the Brazilian transportation and logistics company Rapidão Cometa.

The Opek acquisition gives FedEx Express nationwide access to Poland’s domestic ground network with an estimated $70 million in revenue and 12.5 million shipments each year. Growing popularity of e-commerce has significantly boosted demand for shipping services in Poland.

Raises Prices Second Time This Year

Among other developments, U.S.’s FedEx Freight, FedEx’s less than truckload (LTL) segment, announced a 6.9% rate increase this week. This is FedEx’s second price hike this year as the company tries to improve revenue per package and profit margins. Earlier this year, FedEx raised the general rate by 4.9% for FedEx Ground and FedEx Home Delivery shipments and the rate for FedEx Express covering U.S. domestic, U.S. export and import services by 3.9%. Last quarter, its revenues rose 9% and margins improved despite lower volumes with improved mix and successful hike in its fuel surcharge that was implemented to combat higher oil prices.

We have a $106 Trefis price estimate for FedEx, which is about 20% ahead of the current market price.

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