FedEx Corp. has announced an agreement to acquire Parcel Direct, a division of Quad/Graphics, for $120 million in cash. Parcel Direct is a parcel consolidator and will add a new dimension to the FedEx portfolio of services. The transaction is expected to close during the second fiscal quarter and is subject to customary conditions, including Hart-Scott-Rodino clearance. Based on Parcel Direct's current size, this acquisition is not expected to have a material effect on the fiscal 2005 financial results of FedEx.
Parcel Direct will be a subsidiary of FedEx Ground and will offer a solution to customers in the fast-growing e-tail and catalog industries. These customers are increasingly seeking a cost-effective means of shipping low-weight, less time-sensitive goods to residential customers.
"This acquisition is consistent with our long-standing strategy to acquire leading businesses that meet emerging market needs," says Daniel J. Sullivan, president and chief executive officer of FedEx Ground. "We are confident that we can aggressively grow this new business by combining Parcel Direct's cost-effective and scalable network with FedEx sales, marketing and financial resources."
Parcel Direct, based in New Berlin, Wis., has about 450 employees and generated approximately $250 million of gross revenue in 2003 ($130 million in net revenue). Parcel Direct has developed a successful model for parcel consolidation tailored to meet the needs of targeted high-volume shippers. The model is based on a low-cost, highly efficient network specifically designed to take advantage of the United States Postal Service's Parcel Select service.
Each day thousands of packages are transported from customers' facilities to one of twelve Parcel Direct sorting locations in the United States. Packages are sorted and consolidated at these locations and then transported to local Post Offices for ultimate delivery to residential customers by more than 300,000 United States Postal Service mail carriers. This service is an optimum choice for customers shipping large volumes of low-weight, less time-sensitive packages and will further enhance FedEx Ground's service offerings.
With this acquisition, FedEx will add to its range of distinct residential services designed to meet specific customer needs. Among the other successful residential services that FedEx currently offers are:
* FedEx Express domestic residential services, time-definite services that provide shippers with a money-back guarantee, a closed network with custodial control, Saturday delivery and end-to-end online tracking capabilities through fedex.com.
* FedEx Home Delivery, a day-definite service that provides shippers with a money-back guarantee, a closed network with custodial control, evening delivery, appointment delivery, Saturday delivery and end-to-end online tracking capabilities through fedex.com.
The services provided by Parcel Direct will complement the strategic alliance that FedEx already enjoys with the United States Postal Service:
* FedEx Express currently has a seven-year, $7 billion contract to provide transportation services to the USPS.
* The USPS recently agreed for FedEx Express to provide transportation of Global Express Guaranteed, a co-branded service that offers customers delivery to 194 international countries.
* FedEx and the USPS also have an agreement where FedEx has placed nearly 5,000 FedEx Express Drop Boxes at local Post Offices around the country.