FedEx is set to wholly run its joint venture in China
The world's largest express transportation company Federal Express Corporation (FedEx) has reach an agreement with its Chinese partner Tianjin DTW Group Co., Ltd. to buy up Federal Express-DTW Co., Ltd., a Beijing-based 50-50 express joint venture between both sides, a source disclosed on November 8.
The acquisition will be announced at the end of November or the beginning of December, the source.
After UPS, the world's largest package delivery company, paid up to USD 100 million to end an marriage with Sinotrans Ltd. (SEHK: 0598), a Chinese leading provider of logistics services, FedEx is believed to also divorce from Tianjin DTW Group, a logistics company based in Tianjin, Northern China, sooner or later because it has long been eager to become a player that wholly owns its operations in China.
For now, a source disclosed, FedEx has two acquisition solutions: to buy a 50% stake in the venture from Tianjin DTW Group for CNY 100 million or to buy both the stake and DTW Express Co., Ltd., a service band under its Chinese partner, for CNY 240 million to CNY 320 million.
FedEx inclines to the first one while Tianjin DTW Group to the second one. FedEx wants to buy the stake at a low price in order to gain the venture's service network in China and not to additionally buy a repeated service network from Tianjin DTW Group, the source said.
For its part, Tianjin DTW Group hopes to sell the stake and DTW Express and shift to become a provider of logistics services in China after getting capital from the deal, the source added.
In addition, Chinese companies are weak to do international express business in the market vying with foreign giants. Hence, for Tianjin DTW Group, to sell DTW Express is a wise decision because the latter has a yearly loss of nearly CNY 70 million, an insider explained further.
The FedEx spokesperson declined to comment. And Eddy Chan, regional president for FedEx China, did not directly made a reply, either.
As early as in mid March, FedEx was rumored to acquire DTW Express Co., Ltd. and Federal Express-DTW Co., Ltd. in China.
The Shanghai office of Baker & McKenzie, a leading global law firm in the US, was invited to provide solutions and law services for the express titan's new round of acquisitions in this faster-growing market, into which other international express companies including UPS, DHL, and TNT have piled, too.
These titans never want to expand here on the basis of only partnership with small-sized Chinese counterparts. Their ambitions are to wholly run their operations since their entry into the market.
Since the beginning of the marriage between Tianjin DTW Group and FedEx, the venture Federal Express-DTW has been in fact under control of FedEx, and independently operational from daily operation, office site, recruitment, business development, accounting, and so on. All customers are demanded to put into the FedEx operation system, and payments have long been settled through their credit cards.
In 1995, FedEx chose to collaborate with EAS International Transportation Ltd., which was appointed as its global service participant for China. Three years later, however, it turned to Tianjin DTW Group and terminated the cooperation with the former.
EAS International Transportation complained that the rift between both was attributed to the company's slow expansion and customer resources nibbled by FedEx during the cooperation term. For Tianjin DTW Group, although it is aware of the FedEx strategy, it has virtually become one of FedEx's subsidiaries in China.
In view of FedEx's actions in the past, the strategy is to make use of a cooperator's service network.
One of the company's plans is to expand service network in China in the coming several years, serve more cities, and open more branch companies, told reporters Eddy Chan.
(USD 1 = CNY 8.0857)
From dycj.ynet.com, Page 1, Thursday, November 10, 2005 [email protected]
