FedEx Corp. (NYSE: FDX) announced today that its Board of Directors has completed a thorough evaluation of FedEx Freight’s role within its portfolio. As a result, the Board has decided to pursue a full separation of FedEx Freight, which will be established as a new publicly traded company through the capital markets.
The separation is expected to occur within the next 18 months and will be structured in a tax-efficient way for FedEx stockholders.
Following the separation, FedEx and FedEx Freight will continue to follow their respective growth strategies. This move will enable each company to execute more tailored operational strategies and allocate capital more effectively to meet the distinct demands of the global parcel and less-than-truckload (LTL) markets. While independent, both companies will maintain their strategic collaboration in key commercial, operational, and technology areas. Customers can expect the same high levels of service, speed, and coverage from both entities.
“This is the right time to pursue a separation as we adapt to the dynamic needs of the LTL market,” said Raj Subramaniam, president and CEO of FedEx Corp. “This decision reflects the strength of the business we’ve built and our commitment to doing what’s best for our customers, employees, and shareholders. By separating, we will unlock significant value for our Freight business and position FedEx for even greater value creation for our stockholders.”
R. Brad Martin, vice chairman of the Board and chairman of the Audit and Finance Committee, added, “Over the past 50 years, FedEx has built a world-class global platform that has generated immense value for shareholders and provided growth opportunities for employees. After carefully assessing our portfolio, the FedEx Board is confident that this separation will drive continued growth and long-term value for both companies.”
Strategic Rationale for Separation
FedEx’s evaluation identified several key strategic benefits from separating FedEx Freight into an independent entity, while maintaining strong collaboration between the two companies. These advantages include:
- Enhanced Operational Focus and Strategic Execution: Both companies will have a sharper operational focus and greater flexibility to meet evolving customer needs, enabling them to seize profitable growth opportunities and unlock further market value. FedEx will continue advancing its strategic initiatives such as DRIVE, Network 2.0, and Tricolor.
- Distinct Investment Profiles: Separate public listings with distinct shareholder bases will enhance the value proposition for each company.
- Strong Balance Sheets and Capital Allocation Flexibility: Both FedEx and FedEx Freight will be well-capitalized and have the flexibility to invest in profitable growth and return capital to shareholders.
- Ongoing Synergies: Commercial agreements will ensure continued collaboration between FedEx and FedEx Freight, optimizing operational efficiency and service levels. This will lead to improved speed, better coverage, and cost-effective service delivery.
- Shared Brand Values: The FedEx brand, renowned for its reliability, speed, and trust, will continue to be associated with both companies, with FedEx Freight retaining its name as an independent entity.
This strategic separation is designed to position both companies for long-term growth and continued value creation.