Published by Reuters
FedEx Corp (FDX.N) said on Tuesday it is in talks to possibly buy French express company TATEX, less than two weeks after announcing plans to buy family-owned Polish shipping company Opek Sp. Z o.o., as it expands in Europe with small takeovers.
FedEx, the world’s No. 2 package delivery company, has said it plans to grow organically and through small “tuck-in” purchases in Europe, where it expects a mild recession.
No. 1 package delivery company United Parcel Service Inc (UPS.N), on the other hand, is in the midst of its largest takeover in its nearly 105-year history with the purchase of Dutch peer TNT Express NV (TNTE.AS) for about $6.8 billion.
TATEX has annual sales of about 150 million euro, or roughly $200 million, FedEx said. Opek’s domestic ground network has an estimated $70 million in annual revenue.
Analysts endorsed FedEx’s strategy of growing in Europe with small purchases, saying it can stay competitive there even with UPS’s large tie-up with TNT.
The company has also said it will focus on expanding in Asia, where economic growth is seen topping the pace in Europe.
“I view FedEx’s strategy favorably,” said Benjamin Hartford, senior research associate at Robert W. Baird in Milwaukee. “Some investors look at UPS purchasing TNT as effectively locking FedEx out of Europe. I don’t think that’s the case.”
“From a shareholder perspective as well, it makes more sense for them to deploy capital opportunistically through these small tuck-ins that through a large deal that might be viewed as defensive or unnecessarily expensive if they were to go after TNT,” Hartford added.
The European parcel delivery business is fragmented enough for FedEx to target smaller companies and work toward consolidating that market, analysts agree.
“I would say that certainly a third of the European parcel market in aggregate is comprised of these relatively small, local national or regional parcel providers,” said Hartford. That is a much larger share of smaller companies than in the United States or Asia, from which FedEx can build its European footprint, he added.
TATEX, founded in 1976, is a business-to-business express transportation company for heavy shipments in France, with more than 1,000 employees and a central hub near Paris, FedEx said in a statement.
The company carries more than 19 million parcels annually, specializing in high-tech, spare parts, automotive and clothing.
“We view the potential tuck-in acquisition of TATEX and recent agreement to acquire Opek in Poland as good strategic purchases with relatively low risk,” Deutsche Bank analysts said in a note. “We reiterate our Buy rating as we see compelling value at current levels given U.S. domestic package consolidation, solid pricing trends, and better margins at FedEx Ground.”
FedEx shares were up 2.8 percent in afternoon trading at $90.63 on the New York Stock Exchange, for an 8.5 percent gain year-to-date. The Dow Jones Transportation average .DJT is up 6 percent so far this year.