MEMPHIS, Tenn., December 19, 2024 ... FedEx Corp. (NYSE: FDX) today
announced that its Board of Directors has concluded a comprehensive
assessment of the role of FedEx Freight as part of its portfolio and has
decided to pursue a full separation of FedEx Freight through the capital
markets, creating a new publicly traded company.
The separation is expected to be achieved in a tax-efficient manner for
FedEx stockholders and executed within the next 18 months.
As two industry-leading public companies, FedEx and FedEx Freight will
continue to pursue their growth strategies. The separation will allow
for more customized operational execution along with more tailored
investment and capital allocation strategies to serve the unique and
evolving needs of both the global parcel and LTL markets. They will also
maintain the strategic advantages of cooperation on key commercial,
operational, and technology initiatives. Customers of both businesses
will continue to enjoy the same superior service, speed, and coverage
they have come to expect from FedEx.
“This is the right time to pursue a separation as we respond to the
unique dynamics of the LTL market,” said Raj Subramaniam, FedEx Corp.
president and chief executive officer. “This announcement is a testament
to the strength of the business our team has built, and to our
dedication to doing what’s best for our customers, our team members, and
our stockholders. Through this process, we will unlock value for our
Freight business and position FedEx to create even greater value for
stockholders.”
“Over the last 50 years, FedEx has built an unmatched global platform
that has produced significant value for our stockholders and
opportunities for our team members,” said R. Brad Martin, vice chairman
of the Board and chairman of the Audit and Finance Committee who led the
Board’s oversight of the strategic analysis. “Building upon that
powerful foundation, and following a careful assessment of our
portfolio, the FedEx Corporation Board is confident that a separation of
FedEx Freight will drive continued growth and value creation.”
Strategic Rationale
In its recently completed assessment, FedEx concluded there are
strategic opportunities that arise from separating FedEx Freight into an
independent company and substantial benefits from the continuing
commercial collaboration of FedEx and FedEx Freight. Through a
separation, both FedEx and FedEx Freight will benefit from:
• Enhanced Operational Focus and Strategic Execution: Deeper
operational focus, accountability, and agility to meet customer needs
will better enable both companies to capture profitable growth
opportunities and unlock market value. FedEx will continue executing its
strategic initiatives, including DRIVE, Network 2.0, and Tricolor.
•
Distinct and Compelling Investment Profiles: Separate public
stock listings with distinct stockholder bases will enhance the value
proposition for each company.
•
Strong Balance Sheet and Capital Allocation Optionality: Each
company will be well-capitalized, with flexibility to invest in
profitable growth and return capital to stockholders.
•
Maintained Commercial, Operational, and Technology Synergies: The
benefits of the existing FedEx and FedEx Freight relationships will be
optimized through commercial agreements between the two entities to
maintain operational and service-level continuity. Ongoing collaboration
will be designed to improve the value propositions of both companies by
accelerating speed, improving coverage, and driving efficiencies that
will lower the cost to serve.
• A Shared Brand: The FedEx
brand represents speed, reliability, and trust. These values will extend
across both businesses with the new company continuing to operate under
the FedEx Freight name.
FedEx Value Proposition
FedEx pioneered the express transportation industry more than 50
years ago and remains the industry leader today. In fiscal year 2024,
FedEx revenue totaled $78.3 billion across its remaining business
segments. The Company provides a range of rapid, reliable, time- and
day-definite delivery and related supply chain technology services to
more than 220 countries and territories through an integrated air-ground
express network. FedEx is well-positioned to continue to deliver
significant value to its stockholders through its transformation and
strategic initiatives, focused on reducing the company’s cost to serve
while helping customers compete and win with the world’s smartest and
most efficient logistics ecosystem. The initiatives underway through
DRIVE are expected to create $4 billion in cost savings by the end of
fiscal year 2025, while Network 2.0 is targeted to generate savings of
$2 billion by the end of fiscal year 2027, supporting enhanced
profitability and driving greater flexibility and efficiency across the
network. FedEx remains committed to a continued strong balance sheet at
both entities while continuing to reduce capital intensity and increase
capital returns.
FedEx Freight Value Proposition
With revenue of $9.4 billion in fiscal 2024, FedEx Freight is the
largest LTL carrier with the broadest network and fastest transit times
in its industry. The company has deep and long-standing relationships
with customers who value choice, simplicity, and reliability. With a
focus on safety, facility utilization, revenue quality, and operational
efficiency, FedEx Freight has maintained its leading market share
position while increasing operating profit by nearly 25 percent on
average per year over the last five years. The business has delivered
approximately 1,100 basis points of operating margin expansion over the
same period. FedEx Freight is expected to benefit from a strong balance
sheet that will allow it to maintain and extend its leadership position
in the LTL market.
Transaction Process
The Company’s intent is to execute the planned separation through
a capital markets transaction, creating two independent publicly listed,
industry-leading companies. The transaction is expected to qualify as a
tax-free separation for U.S. federal income tax purposes.
The Company expects to commence the separation process immediately, with
the intent to execute the transaction within 18 months, subject to
regulatory and certain other conditions, and final approval of the FedEx
Board of Directors.
Goldman Sachs & Co. LLC is serving as the financial advisor and
Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal
counsel.
Corporate Overview
FedEx Corp. (NYSE: FDX) provides
customers and businesses worldwide with a broad portfolio of
transportation, e-commerce and business services. With annual revenue of
$87 billion, the company offers integrated business solutions utilizing
its flexible, efficient, and intelligent global network. Consistently
ranked among the world’s most admired and trusted employers, FedEx
inspires its more than 500,000 employees to remain focused on safety,
the highest ethical and professional standards, and the needs of their
customers and communities. FedEx is committed to connecting people and
possibilities around the world responsibly and resourcefully, with a
goal to achieve carbon-neutral operations by 2040. To learn more, please
visit fedex.com/about.
Certain statements in this press release may be considered
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act, such as statements regarding expected benefits
and synergies to be realized by FedEx and FedEx Freight in the
separation, the timing of the proposed separation, future financial
targets, business strategies, management’s views with respect to future
events and financial performance, and the assumptions underlying such
expected cost savings, targets, strategies, and statements.
Forward-looking statements include those preceded by, followed by or
that include the words “will,” “may,” “could,” “would,” “should,”
“believes,” “expects,” “forecasts,” “anticipates,” “plans,” “estimates,”
“targets,” “projects,” “intends” or similar expressions. Such
forward-looking statements are subject to risks, uncertainties, and
other factors which could cause actual results to differ materially from
historical experience or from future results expressed or implied by
such forward-looking statements. Potential risks and uncertainties
include, but are not limited to, our ability to successfully execute the
separation transaction; our ability to obtain any consents or approvals
required to complete the separation; potential uncertainty during the
pendency of the separation transaction that could affect FedEx’s
financial performance; the possibility that the separation transaction
will not be completed within the anticipated time period or at all; the
possibility that the separation transaction will not result in the
intended benefits; the possibility of disruption, including changes to
existing business relationships, disputes, litigation, or unanticipated
costs in connection with the separation transaction; uncertainty of the
expected financial performance of FedEx or FedEx Freight following
completion of the transaction; negative effects of the announcement or
pendency of the transactions on the market price of FedEx’s securities
and/or on the financial performance of FedEx; evolving legal,
regulatory, and tax regimes; changes in the economic conditions in the
global markets in which we operate; actions by third parties, including
government agencies; our ability to successfully implement our business
strategy and global transformation program and optimize our network
through Network 2.0; our ability to achieve our cost-reduction
initiatives and financial performance goals; and other factors which can
be found in FedEx Corp.’s and its subsidiaries’ press releases and FedEx
Corp.’s filings with the Securities and Exchange Commission. Any
forward-looking statement speaks only as of the date on which it is
made. We do not undertake or assume any obligation to update or revise
any forward-looking statement, whether as a result of new information,
future events, or otherwise.