FedEx Closes Pending Acquisitions

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FedEx Corporation (FDX) has closed the TATEX Express buyout, which was proposed in April. French-based TATEX Express provides courier and express transport services to industrial customers across Europe and international markets.

Although the terms of the deal remain undisclosed, we expect FedEx to gain from the proven market position of TATEX.  Annual shipments of TATEX come to 19 million parcels, accounting for 150 million Euros in sales revenue.

Additionally, FedEx recently wrapped up its acquisition of Brazilian transport and logistics company, Rapidao Cometa. With $500 million annual revenues (as of 2011), 770 vehicles and 145 distribution centers, Rapidao Cometa remains a strategic fit for FedEx to strengthen its Brazilian footprint and is concurrent with its plan to expand in Latin America and the Caribbean markets.

We believe that the acquisition strategy of FedEx remains impressive as these takeovers will enable the company to spread in a variety of target markets. We foresee potential opportunities not only in Europe but also in emerging markets like China, India, Japan and Brazil, as well as other Asian regions for international growth.

Prior to these acquisitions, FedEx acquired Polish company, Opek Sp.z o.o, which is estimated to garner annual revenue and shipments of $70 million and 12.5 million, respectively.

However, it is difficult to quantify the near-term financial gains that the company will derive out of its recent expansion initiatives, particularly in Europe, where sovereign debt concerns could significantly weigh on the economic recovery. Moreover, the company faces stiff competition from United Parcel Service (UPS). However, long-term prospects of these acquisitions look promising.

Currently, FedEx retains a Zacks #3 Rank (short-term Hold recommendation). We also reiterate our long-term Neutral rating on the stock.

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