FedEx to acquire leading parcel consolidator Parcel Direct
FedEx Corp have announced an agreement to acquire Parcel Direct, a division of Quad/Graphics, for USD120 million in cash. Parcel Direct is a leading parcel consolidator and will add a new dimension to the FedEx portfolio of services. The transaction is expected to close during the second fiscal quarter and is subject to customary conditions, including Hart-Scott-Rodino clearance. Based on Parcel Direct's current size, this acquisition is not expected to have a material effect on the fiscal 2005 financial results of FedEx.
Parcel Direct will be a subsidiary of FedEx Ground and will offer a proven solution to customers in the fast-growing e-tail and catalog industries. These customers are increasingly seeking a cost-effective means of shipping low-weight, less time-sensitive goods to residential customers.
"This acquisition is consistent with our long-standing strategy to acquire leading businesses that meet emerging market needs," said Daniel J. Sullivan, president and chief executive officer of FedEx Ground. "We are confident that we can aggressively grow this new business by combining Parcel Direct's cost-effective and scalable network with FedEx sales, marketing and financial resources."
Parcel Direct, based in New Berlin, Wis., has about 450 employees and generated approximately $250 million of gross revenue in 2003 ($130 million in net revenue). Parcel Direct has developed a successful model for parcel consolidation tailored to meet the needs of targeted high-volume shippers. The model is based on a low-cost, highly efficient network specifically designed to take advantage of the United States Postal Service's Parcel Select service.
Each day thousands of packages are transported from customers' facilities to one of twelve Parcel Direct sorting locations in the United States. Packages are sorted and consolidated at these locations and then transported to local Post Offices for ultimate delivery to residential customers by more than 300,000 United States Postal Service mail carriers. This service is an optimum choice for customers shipping large volumes of low-weight, less time-sensitive packages and will further enhance FedEx Ground's service offerings.
With this acquisition, FedEx will add to its range of distinct residential services designed to meet specific customer needs. Among the other successful residential services that FedEx currently offers are:
— FedEx Express domestic residential services, time-definite services that provide shippers with a money-back guarantee, a closed network with custodial control, Saturday delivery and end-to-end online tracking capabilities through fedex.com.
— FedEx Home Delivery, a day-definite service that provides shippers with a money-back guarantee, a closed network with custodial control, evening delivery, appointment delivery, Saturday delivery and end-to-end online tracking capabilities through fedex.com.
"Our 3,000 plus person sales-force has a strong track record of effectively selling a bundle of services to customers," said T. Michael Glenn, executive vice president of FedEx Corp. "The addition of Parcel Direct's complementary residential service enhances our ability to meet our customers' specific needs and should grow Parcel Direct's business."
The services provided by Parcel Direct will complement the strategic alliance that FedEx already enjoys with the United States Postal Service.
— FedEx Express currently has a seven-year, $7 billion contract
to provide transportation services to the United States Postal
Service.
— The United States Postal Service recently agreed for FedEx
Express to provide transportation of Global Express
Guaranteed, a co-branded service that offers customers
delivery to 194 international countries.
— FedEx and the United States Postal Service also have an
agreement where FedEx has placed nearly 5,000 FedEx Express
Drop Boxes at local Post Offices around the country, giving
FedEx customers greater access to FedEx Express services.
