FedEx Freight will become a separate company after FedEx Corp. announced its plan on December 19 to spin off the FedEx Freight unit, resulting in the largest publicly traded less-than-truckload carrier.
FedEx said its Board of Directors has concluded a comprehensive assessment of the role of FedEx Freight as part of its portfolio and has decided to pursue a "full separation" of FedEx Freight through the capital markets, creating a new publicly traded company.
The American parcel giant said the separation is expected to be executed within the next 18 months.
It noted that FedEx and FedEx Freight will continue to pursue their growth strategies and the separation will allow for more customized operational execution along with more tailored investment and capital allocation strategies to serve the unique and evolving needs of both the global parcel and LTL markets.
"They will also maintain the strategic advantages of cooperation on key commercial, operational, and technology initiatives," FedEx said.
FedEx Freight ranks as the top LTL carrier on various lists including InTek's Top 10 LTL freight companies as well as Journal of Commerce's Top 25 LTL carriers.
"This is the right time to pursue a separation as we respond to the unique dynamics of the LTL market," said Raj Subramaniam, FedEx Corp. president and chief executive officer.
"This announcement is a testament to the strength of the business our team has built, and to our dedication to doing what's best for our customers, our team members, and our stockholders. Through this process, we will unlock value for our Freight business and position FedEx to create even greater value for stockholders," he added.
FedEx said in the announcement that it concluded there are strategic opportunities that arise from separating FedEx Freight into an independent company and substantial benefits from the continuing commercial collaboration of FedEx and FedEx Freight.
These include enhanced operational focus and strategic execution, distinct and compelling investment profiles, a strong balance sheet and capital allocation optionality, as well as maintaining commercial, operational, and technology synergies between FedEx and FedEx Freight.
FedEx Freight reported a revenue of US$9.4 billion in fiscal 2024 and is the largest LTL carrier with the broadest network and fastest transit times in its industry. It has also maintained its market share position while increasing operating profit by nearly 25% on average per year over the last five years.
The business has delivered approximately 1,100 basis points of operating margin expansion over the same period.
"FedEx Freight is expected to benefit from a strong balance sheet that will allow it to maintain and extend its leadership position in the LTL market," the announcement said.
FedEx said it intends to execute the planned separation through a capital markets transaction, creating two independent publicly listed companies. The transaction is expected to qualify as a tax-free separation for U.S. federal income tax purposes.
"The Company expects to commence the separation process immediately, with the intent to execute the transaction within 18 months, subject to regulatory and certain other conditions, and final approval of the FedEx Board of Directors," it added.
