Given how fast the economy is growing in places like Brazil, India, the Middle East, and some locations in Africa, you'd think that logistics companies would be concentrating their resources in these developing regions. And they may well be. But for the moment, it appears they are not neglecting mature markets either. In the case of Europe, the continent's economic woes seem to be creating new opportunities for US logistics companies.
Earlier this month, FedEx Corp. (NYSE: FDX) announced it signed an agreement to acquire the Polish courier company Opek Sp.z o.o., as part of its strategy for growth in Europe. This comes only a few weeks after United Parcel Service said it was buying Dutch-based TNT Express in an all-cash deal valued at about $6.9 billion.
(See: UPS Strengthens Its EU Presence.)
Unfortunately, the FedEx announcement was followed up with less-than-happy news last week from the World Trade Organization. The WTO said that while global trade in goods will increase by 3.7 percent this year after expanding a less-than-forecast 5 percent in 2011, the debt crisis in Europe continues to weigh on the commerce sector, BusinessWeek reported.
FedEx doesn't seem worried. The Opek acquisition is expected to give the FedEx Express business unit access to a nationwide domestic ground network with an estimated $70 million in annual revenue and 12.5 million shipments annually, the company said in the statement referenced above, adding that it is continuing "its European expansion through smart, strategic investments."
Frederick W. Smith, FedEx's chairman, president, and CEO, had this to say about the company's European expansion:
In recent years, we have made significant investments throughout Europe, greatly expanding our network coverage and improving service to customers. Our presence in Europe is backed by strong leadership and management and dedicated team members. We have an excellent strategy that has steadily advanced our position in the region, and we are well positioned for profitable growth as we increase the number of direct-served locations in Europe.
FedEx is definitely on a multiyear European growth streak that started in 2006 with acquisitions in the UK, and then in Hungary the following year. In 2010, FedEx Express relocated its Central and Eastern European hub from Frankfurt to Cologne, Germany, and in 2009 it expanded its European hub at Roissy-Charles de Gaulle Airport in Paris, making it the largest FedEx hub outside the US, according to the company.
It doesn't end there. So far in fiscal 2012, FedEx Express has opened 26 new stations across France, Germany, Italy, the Netherlands, Northern Ireland, and Sweden. Additionally, FedEx Trade Networks has added 22 European locations in recent years to complement its express services.
The Wall Street Journal made some interesting points on this broader logistics trend. The newspaper's Ishaq Siddiqi reported:
Analysts said the recent deal activity suggests that cash-rich companies in the logistics sector are looking to put their money to work. Investment bank Morgan Stanley noted that prospects for an increased level of merger and acquisition activity across all sectors are reasonably good in Europe. They cite healthy balance sheets and cash flows for European companies, return on equity that is above historical averages as well as higher share prices.
So who's next on the acquisition list?