This might be a silly thought but would Ackman try and invest in our Ground division and possibly try to make this his own company? Wouldn't it make sense to stay away (and separate) from losing opcos as Express,FDX Office and FDX Freight and try to build what looks like a very bright and profitable Ground business. Also, would a hostile takeover by UPS of our Ground division be essentially a stake in the heart of FDX?
Impossible
FedEx is comprised of many separate operating companies, BUT with a SINGLE stock covering all of them. When an investor buys 'FedEx', they are buying Ground, Express, Freight, Office, Trade Networks, Services, and on and on.
There is no way an outside entity could 'pick off' any of the separate opcos without buying the ENTIRE company first. The 'elephant' simply cannot be cut up and consumed one plate at time without taking the entire elephant down first and taking it to the butcher - and it is deliberately setup for that reason.
Back 15 years ago, FedEx could have made the decision to issue separate stock for each of the opcos (and have FedEx Corporation act as merely a management company for each of the separate companies). They didn't do that. They LEGALLY set up each company as a separate operating company, operating under different labor laws, compensations levels and went so far as to make employees not able to 'transfer' between opcos without 'terminating' their employment with one opco first (even here, FedEx has their own little loophole called FedEx Services); BUT the whole shebang was owned as "FedEx Corporation" with a single stock covering ALL operating companies.
Express as far as Wall Street is concerned, is simply a jobs program right now for its employees, since it doesn't create enough profit to justify the investment in assets that exists. If Express WASN'T lumped into the FedEx 'family', then it WOULD be ripe for takeover. Express' total contribution towards the overall FedEx stock price is peanuts. Of the $103 current stock price, Express is less than $10 of that. The rest far and away is Ground, followed by Freight (if one were to divide up the opcos and place a valuation on this new 'hypothetical' stock).
If Express were a separate opco, then with that supposed $10 stock price, its book value (value of all assets minus liabilities) would be GREATER than its market capitalization. Then the vultures would be circling Memphis, looking to buy in, oust the existing executive management, then shut the company down and sell off the assets for more than they purchased the entire company for.
Let me put it another way. If I were to own a small company and have $250,000 invested in it - I'd need (depending on many factors, primarily risk of the company failing outright and losing a substantial amount of the original investment amount), an annual profit of between $15,000 and $40,000 to justify having that investment in that company - and not have the $250,000 placed into the stock market where it would achieve those returns independently. If that hypothetical company were only generating annual profits of between $5,000 and $10,000, then it simply isn't being run correctly IF that level of investment is present (assuming book value of assets, both physical and intellectual properties). If this situation of only generating annual profits of $5,000 to $10,000 continues while having a book value of $250,000, the company would be better off being closed down and the assets liquidated (assuming one could get back as much of that $250,000 as possible without taking a loss in the liquidation process).
This situation actually happens more often than people think. In the case of FedEx, it has two things which prevent an outside entity from coming in and selling off the assets for a price greater than the purchase price of all the outside shares of stock. First, it is a truly big elephant - $32 BILLION in market capitalization right now. Secondly, no outside group could pick off Express and liquidate its assets without purchasing the ENTIRE spectrum of FedEx. If FedEx HADN'T purchased RPS back 15 or so years ago and turned it into a money making machine, FedEx would be trading at around $25 per share right now - and institutional investors would've ousted Fred at least 5 years ago when profitability plummeted and Fred lost $600 million in the Kinko's/Office mess.
Ground is what is keeping the executive management of FedEx employed - no other way to put it. They want to stay employed, thus why Express is being reorganized to bring its profitability up to what is expected for such a large capital investment present within Express. Should they fail in doing this, there will be considerable pressure for a new management team to step into FedEx and 'clean up the mess' that exists in Express (all as seen from Wall Street). Fred and cronies don't want to step down as of yet - thus what is occurring in Express right now (ALL employees being shoved under the bus in order to satisfy investors desire for profitability). The reorganization is appearing to work. stock price is gradually rising - all due to the anticipation of Express making a 'real profit' once again. All of Ground's profits are factored into the FedEx stock price already (Wall Street values things with anticipated profits ALREADY factored into a stock's price). If Express' profits rise - so too will the stock price of FedEx (stock price rises and falls based on anticipated profitability LONG into the future).
