FedEx Express, a wholly owned subsidiary of FedEx Corporation (FDX), announced on May 1 that it had completed the purchase of Israel-based Flying Cargo’s international express business. However, the delivery giant hasn’t disclosed the financial terms of the deal.
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The two companies entered into a conditional acquisition agreement on January 15. Israel’s antitrust government body gave its approval in February, and FedEx Express completed the buyout well ahead of its forecast completion by the end of the first half of 2019.
Flying Cargo provides end-to-end supply chain solutions including logistics, fulfillment, warehousing, and goods distribution in Israel. Its International Express business unit used to provide air cargo transportation services to and from Israel.
FedEx’s and Flying Cargo’s ~30-year business agreement was nearing expiration. The business relationship helped FedEx offer a wide range of international transportation services.
The buyout is anticipated to enhance FedEx’s global operations and better compete against DHL Express, its main rival in Israel. DHL has its own aircraft flying into and out of Israel, giving it a competitive and pricing advantage over FedEx. With Flying Cargo’s International Express acquisition, FedEx will now have its own fleet of cargo aircraft as well.
Further, the Israeli market is best known for high-value technology and medical products, which need fast and secure transport. Therefore, expansion in this market could improve FedEx’s revenue and make it even more competitive.
Whereas ~2.7% of the SPDR S&P Transportation ETF (XTN) is allocated toward FDX, it has also invested in FedEx’s major competitors: XPO Logistics (XPO) and CH Robinson Worldwide (CHRW) comprise 3.6% and 2.5% of its portfolio, respectively.