In a move to expand globally, leading freight carrier FedEx Corp. (FDX) is acquiring service provider, Supaswift and its subsidiaries that offer FedEx Express international services in Southern Africa. According to market reports, FedEx completed the first phase of the acquisition, which included businesses in South Africa, Malawi, Mozambique, Swaziland and Zambia. The company is also contemplating the acquisition of Supaswift's businesses in Botswana and Namibia.
The deal is expected to provide access to 7 markets in Southern Africa with operations through 39 facilities and the existing set up of 1,000 Supaswift's employees. The company believes that the acquisition would translate into business synergies arising from emerging markets like the African continent.
We believe near-term earnings growth will be aided by increasing profitability in Freight coupled with continued growth in the Ground segment. Additionally, improving international revenues and operational efficiency in FedEx Express will also support earnings improvement, going forward.
FedEx is boosting its international business through substantial investments to enhance its existing routes and make strategic acquisitions. The company is building a new hub in Guangzhou, China, to cater to 100 new Chinese cities within the next five years. Recently, the company announced that it will invest $100 million in China to strengthen its position in the country against its rival – United Parcel Service, Inc. (UPS).
As for acquisitions, in 2012, the company took over Polish courier company Opek Sp. z o.o. as well as French B2B Express transportation company, TATEX. Soon after, the company acquired Rapidão Cometa, a Brazilian transportation and logistics company.
We believe the investments in organic growth as well as acquisitions will lead to greater operational efficiencies, providing a competitive edge, generating significant long-term synergies, supporting international business growth and driving profitability.
FedEx, which operates with the likes of Air Transport Services Group, Inc. (ATSG) and Radiant Logistics, Inc. (RLGT) retains a Zacks Rank #3 (Hold).
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