FedEx: A Likely Buyout Target - Barron's

Discussion in 'The Latest FedEx Headlines' started by cheryl, Jul 9, 2007.

  1. cheryl

    cheryl I started this. Staff Member

  2. Channahon

    Channahon New Member

    Summary: Steady growth numbers and exposure to the relatively stable ground and freight transport sector are two reasons shipping giant FedEx (FDX) could be attractive to potential buyers, says Streetwise editor Michael Santoli. With an enterprise value of $35 billion ($34b market cap and $1b debt) it's big, but recent buyouts of well-run large growth companies like First Data (FDC), Alltel (AT), Harrah's Entertainment (HET) and Hilton Hotels (HLT) suggest LBO firms are attracted to sturdy large-cap growth companies of its ilk. Recent hesitance in the LBO-debt market would not likely be an issue in a FedEx buyout considering its real assets, including 700 aircraft and 44,000 trucks. A full 70% of FedEx's $3.5 billion planned capital spending in 2007 is growth oriented. And FedEx's underperforming Kinko's unit is attractive to fix-it-up oriented private equity buyers. Even without a deal, shares are reasonable at 15x 2008e earnings.

    Rival United Parcel Service (UPS) faces another potential strike next year.

    It's a shame the only thing mentioned about UPS is a potential strike. What does that have anything to do with a FedEx buyout? Subliminal suggestion to get more volume for FedEx?
     
  3. Dand_E_Don

    Dand_E_Don New Member

    I'd also like to know what effect Wall Street thinks a buyout of FedEX will have on the efforts to organize workers there. If Congress continues on its apparent course to reclassify the FDX workers, it'll be that much easier for them to organize. Wouldn't that be a threat to any LBOs?

    Maybe Fred just wants to cashout.
     
  4. GuyinBrown

    GuyinBrown Blah

    No kidding. I was going to say the same thing but you beat me to it... :wink:

    Why didn't they say... "FedEx potentially faces a monumental increase in overhead now that they are governed by the NLRB and the possibility of unionizing it's labor force looms on the horizon."?

    Clearly a UPS hater wrote that article... :laugh:
     
  5. Dand_E_Don

    Dand_E_Don New Member

    While it's true that "FedEX potentially faces a monumental increase in overhead now that they are governed by the NLRB and the possibility of unionizing it's labor force looms on the horizon", it's still not a done deal. In the meantime, Wall Street seems preoccupied with the short term instead of the longer term. I think any attempts to buyout FDX will ultimately involve some unpleasant "medicine" for the buyers.
     
  6. GuyinBrown

    GuyinBrown Blah

    That's exactly my point... There was no need to bring up a potential strike at UPS either. Negotiations started early and from all indications they're progressing well.
     
  7. Channahon

    Channahon New Member

    SMITH FREDERICK W: Declared Holdings

    Company/Relationship Reported Shares Ownership FEDEX CORP
    Officer
    NYSE:FDX
    (historical quotes, profile, SEC, other insiders) 7-May-07
    3-Jan-06
    14,935,085 Direct
    102,928 Indirect
    15,038,013 - Total Shares


    Insider & restricted shareholder transactions reported over the last two years

    Date Shares Stock Transaction

    May-07 225,000 FDX shares Option Exercise at $26.44 per share.
    Cost of $5,949,000

    May-07 213,654 FDX shares Automatic Sale at $110 - $110.2 per share.
    Proceeds of about $23,523,000

    Apr-07 75,000 FDX shares Option Exercise at $26.44 per share. Cost of $1,983,000

    Apr-07 75,000 FDX shares Automatic Sale at $110 - $110.19 per share.
    Proceeds of about $8,257,000

    Looks like Fred has been busy in April and May selling some stock and exercising options.

    The transactions that catch my eye are in May.

    Maybe there is some truth to a buyout and Fred is getting ready.
     
  8. GuyinBrown

    GuyinBrown Blah

    Wouldn't he want to hold onto his shares and sell them after a buyout though? I would think that a buyout would only increase the price of the stock.
     
  9. Coldworld

    Coldworld Well-Known Member

    do you all think a buyout is really possible??Does anyone have any ideas on who would buy them out??This is very interesting.
     
  10. RockyRogue

    RockyRogue Agent of Change

    Yes, I think its very possible. I wasn't born at the time or was an infant if I was but the "corporate raider era" comes to mind. IMHO, I could see an investment firm--Cerberus or Texas Pacific are two I've heard of--buy FDX, gut it for all its worth and sell the pieces to UPS or DHL. I'm not an economist or a business expert, let alone a lawyer but UPS would probably have a very big problem buying anything but equipment because of the anti-trust issues. However, FDX's modern and large facilities could be enticing. Any thoughts?? -Rocky
     
  11. buzzy

    buzzy Guest

    I don't believe that the company will be for sale or bought out. Fred Smith could have sold the company years ago, and would have been financially set for generations. As much as people love to hate a winner and a leader, he will continue to run the company for years to come. As far as the overhead with the NLRB: The money he spends to fight them and defend the contractor model is a drop in the bucket compared to the money that comes in. Look at the profit margin. FedEx can fight this for years until it gets to the supreme court with appeal after appeal. I think it's UPS that leaked the rumor and it backfired, making FedEx more appealling than ever. The NLRB is only legally involved with the employees of FedEx, such as package handlers to clerks to management. Existing contractors have a great thing going and they know it. After leaving the building, nobody bothers them more than maybe once a day to see if they'd like to try an attempt one more time. Sometimes they can sometimes they can't. An employee has no choice. Funny that some people couldn't hack it and now they seek retribution out of nothing more than some greedy lawyers and union reps that stole from existing members who couldn't care less about them.