FedEx to Separate FedEx Freight into Independent Company
On December 19, FedEx Corp. announced plans to spin off its FedEx Freight unit into a separate publicly traded company. This move positions FedEx Freight as the largest publicly traded less-than-truckload (LTL) carrier in North America. The decision came after a thorough evaluation by FedEx’s board of directors regarding the role of FedEx Freight within the company’s broader portfolio. The spin-off is expected to enhance operational focus for both entities while maintaining synergies between the two.
FedEx Corp. CEO Raj Subramaniam explained the timing of the decision, saying, “This is the right time to pursue a separation as we respond to the unique dynamics of the LTL market. Through this process, we will unlock value for our Freight business and position FedEx to create even greater value for stockholders.” The separation process is set to begin immediately and is projected to be completed within 18 months, pending regulatory approvals and final board consent.
Strategic Benefits and Financial Impact
FedEx highlighted the benefits of creating two independent companies, emphasizing that FedEx Freight would have the opportunity to execute customized strategies for the LTL market. The separation is designed to enhance both companies’ ability to operate with agility, focus, and accountability while improving their capacity to pursue profitable growth opportunities. FedEx also reassured stakeholders that the two companies would continue collaborating through commercial agreements to maintain operational continuity and service levels.
Financially, FedEx Freight is well-positioned for the separation, with $9.4 billion in revenue projected for fiscal 2024. Over the past five years, the division has delivered an average annual operating profit increase of nearly 25%, with notable margin expansions. The company believes a strong balance sheet will allow FedEx Freight to maintain its leadership position in the LTL market. FedEx also confirmed that the spin-off would qualify as a tax-free transaction for federal income tax purposes.
Future Outlook and Leadership Confidence
The newly independent company will continue to operate under the FedEx Freight name, benefiting from its established reputation and market leadership. Both FedEx Corp. and FedEx Freight are expected to leverage their cooperative advantages to optimize technology, coverage, and efficiencies while lowering operational costs.
R. Brad Martin, vice chairman of the FedEx board and chairman of the Audit and Finance Committee, expressed confidence in the decision, stating, “Building upon our powerful foundation, the board is confident that a separation of FedEx Freight will drive continued growth and value creation.”
This strategic realignment marks a significant milestone for FedEx, allowing the company to sharpen its focus on global parcel delivery while empowering FedEx Freight to lead the evolving LTL market independently.
