FedEx Announces Intent to Separate FedEx Freight, Creating Two Industry-Leading Public Companies

Business Wire 19-Dec-2024 4:02 PM

• Unlocks significant value for FedEx stockholders through creation of a new publicly listed less-than-truckload (LTL) industry leader
• Preserves commercial and operational synergies between both companies
• Proposed separation enables greater strategic, operational, and financial execution for each company and its stakeholders

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.

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