uploads/2019/01/fedex-2655332_1280.jpg

FedEx to Buy Flying Cargo’s International Express Unit

By

Updated

Expands global operations

FedEx (FDX) is acquiring an Israeli company’s delivery and logistics business to expand its global operations. On January 15, the company announced that its wholly owned subsidiary FedEx Express entered a conditional agreement with Israel-based Flying Cargo Group to acquire the latter’s International Express business unit. However, the companies haven’t disclosed the financial terms of the deal yet. The transaction is likely to close by the end of the first half of 2019 subject to certain regulatory approval.

Flying Cargo specializes in providing end-to-end supply chain solutions including warehousing, logistics, fulfillment, and distribution of goods in Israel. The company’s International Express provides air cargo transportation services to and from Israel.

Article continues below advertisement

The recent deal came at a time when a service agreement between the two companies is nearing expiration. FedEx and Flying Cargo have had a business relationship for almost 30 years. FedEx started operating in Israel through a service agreement with Flying Cargo in 1990. The long-standing business relationship helped FedEx provide a wide range of international transportation services to and from Israel to over 220 countries.

Therefore, the acquisition is expected to help FedEx enhance its global operations and better compete against the main rival in the country, DHL Express, which flies its own aircraft into and out of Israel. Further, the Israeli market is well known for high value medical and technology products, which need fast transport services. Therefore, expanding its footprint across this part of the world could help FedEx improve revenues.

Other recent acquisitions

Growing through acquisitions has remained a key strategy of FedEx. The approach has helped the company expand its global footprint, enhance its capabilities, bring in new business relationships, and add to the customer base.

Last year, FedEx made two acquisitions, UK-based P2P Mailing Limited for 92 million pounds and Australia-based Manton Air-Sea for less than $10 million. With the purchase of P2P, FedEx enhances its capability in last-mile delivery service across the UK, while the Manton Air-Sea buyout expanded its logistics services across Australia.

FedEx has been more aggressive on the acquisition front compared with other logistics companies such as United Parcel Service (UPS), XPO Logistics (XPO), and CH Robinson Worldwide (CHRW).

The iShares Transportation Average ETF (IYT) has allocated 10.7% of its portfolio to the stock and 6.3% in FedEx competitor United Parcel Service.

Advertisement

More From Market Realist