*FedEx Purchases American Freightways for $950 Million

FedEx Corp., Memphis, TN, last week acquired American Freightways Corp., Harrison, AR, for $950 million in cash and stock.

AF is a less-than-truckload carrier serving 40 states, mostly in the Midwest and on the East Coast. FedEx already owns Viking Freight, another LTL carrier.

LTL carriers usually handle bulk freight shipments weighing more than 150 pounds from several companies on the same truck. LTL carriers can transport goods entirely by truck and still meet day-definite delivery requirements. LTLs do not rely on air transportation — which, though reliable, can be expensive — therefore becoming more popular among customers. Industry experts predict that the regional LTL market will grow by nearly 10 percent per year from 2000 to 2004.

The partnership will extend FedEx’s reach by expanding its next-day regional LTL freight service with all-points coverage in 48 states in a greater number of regional delivery markets. Before the acquisition, both Viking and AF relied on third-party transportation services to expand their coverage areas.

AF is the fourth-largest in that segment of the delivery market. The joint revenues of AF and Viking, however, will create the second-largest regional LTL freight unit in the United States with revenue of more than $1.6 billion.

“This acquisition is a perfect strategic fit that will give FedEx a unique competitive advantage, generating incremental volume and revenue that neither business could capture as a stand-alone,” said Frederick W. Smith, FedEx chairman and president/CEO. “These two networks complement each other geographically, matching Viking's leadership in the West with American Freightways' strong presence throughout the Midwest, South and Northeast.”

Smith said that extending the FedEx network also gives FedEx customers “just what they need in today's high-speed, hi-tech new economy — greater choice and flexibility in creating complete supply-chain solutions.”

The primary focus of the new FedEx LTL freight group is on intraregional transportation, with day-definite delivery in one to two business days. However, customer shipments can move anywhere in the country in up to four days as information systems become integrated. According to FedEx, this represents a competitive edge over national long-haul LTL carriers, which typically take five to seven days to move freight across the country.

In addition, FedEx said that AF and Viking would offer distinct advantages over stand-alone regional LTL companies, with direct pickup and delivery, wider geographic coverage and greater market density.

AF and Viking will operate independently under their own brand names. Each company's sales team will sell bundled, multiregional LTL services. Over time, the entire FedEx sales force also will be trained to cross-sell LTL services to FedEx Express and FedEx Ground customers, which should generate incremental volume and revenue in other FedEx transportation segments.

Viking and AF domestic service areas overlap in Alaska, Arizona, Colorado, Hawaii and New Mexico as well as Calexico, CA, and El Paso, Texas. Neither company serves Montana nor Wyoming. AF also serves the Caribbean, Guam, Puerto Rico and South America, and both companies serve Canada and Mexico.

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