FedEx 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 complete separation of FedEx Freight through the capital markets, creating a new publicly traded company. The separation is expected to be tax-efficient for FedEx stockholders and will be executed within the next 18 months.
Operating 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 and more tailored investment and capital allocation strategies to serve the unique and evolving needs of the global parcel and LTL markets. And they will also maintain the strategic advantages of cooperation on key commercial, operational, and technology initiatives. And customers of both businesses will continue to enjoy the same superior service, speed, and coverage they have come to expect from FedEx.
FedEx recently 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. And through a separation, both FedEx and FedEx Freight will benefit from:
1.) Deeper operational focus, accountability, and agility to meet customer needs will 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.
2.) Separate public stock listings with distinct stockholder bases will enhance the value proposition for each company.
3.) Each company will be well-capitalized, with the flexibility to invest in profitable growth and return capital to stockholders.
4.) The benefits of the existing FedEx and FedEx Freight relationships will be optimized with commercial agreements between the two entities to maintain operational and service-level continuity. And ongoing collaboration will be designed to improve both companies’ value propositions by accelerating speed, improving coverage, and driving efficiencies that will lower the service cost.
5.) 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 pioneered the express transportation industry over 50 years ago and remains the industry leader today. In fiscal year 2024, FedEx’s 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.
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.
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. And the company has deep and long-standing relationships with customers who value choice, simplicity, and reliability. 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.
Goldman Sachs is the financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP is the legal counsel.
KEY QUOTES:
“This is the right time to pursue a separation as we respond to the unique dynamics of the LTL market. 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.”
- Raj Subramaniam, FedEx president and chief executive officer
“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. 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.”
- 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
