United Parcel Service, Atlanta, has agreed to acquire freight-forwarder Fritz Cos. Inc., San Francisco, for approximately $450 million in UPS Class B common stock, UPS announced yesterday.
Fritz is one of the world's leading freight-forwarding, customs brokerage and logistics concerns, with $1.6 billion in gross revenue in its most recent fiscal year.
The acquisition will allow UPS to offer a broad, integrated portfolio of services for moving everything from small packages to heavy freight by any mode of transport worldwide.
Fritz's customers, meanwhile, will gain easier access to global supply-chain management, service parts logistics and financial offerings through UPS.
UPS expects to complete the transaction during the second quarter this year. It will be the first UPS stock acquisition since its initial public offering in November 1999. The transaction is subject to customary closing conditions, including approval by Fritz shareholders and regulatory clearance.
Fritz chairman/CEO Lynn C. Fritz, who holds approximately 36 percent of the outstanding shares of the company, has agreed to vote in favor of the acquisition.
“We are very excited about the powerful combination that UPS and Fritz will create, and I believe the decision to join the UPS team is the best for the growth and development of this business,” Fritz said. “We have grown into an industry force over the past 67 years, but we can do even more with UPS' systems, network and vision of enabling global commerce.”
Joe Pyne, senior vice president for corporate development at UPS, said, “This acquisition enhances UPS' strategy by providing comprehensive solutions across the supply chain at any point our customers desire, moving goods of any size, by any mode, anywhere in the world.”
Fritz owns and operates 400 facilities in more than 120 countries and has more than 10,000 employees. In addition to its forwarding, customs brokerage and logistics services, the company offers intermodal transfer services; duty drawback options; consulting on tax, trade and tariff matters; market research; and training services.
Fritz reported net revenues of $619.3 million during its latest fiscal year, which ended May 31. Net income for the year totaled $17.4 million. Approximately 28 percent of Fritz's net revenue was generated from airfreight forwarding, 21 percent from ocean freight forwarding, 30 percent from customs brokerage operations and 21 percent from logistics services.
UPS already operates in the freight-forwarding and customs brokerage arenas through a number of subsidiaries. The acquisition of Fritz, however, signals UPS' intent to expand that business to provide its customers with solutions across the supply chain.
“This will be a powerful combination, offering single accountability to our customers,” Pyne said. “We foresee a tremendous value proposition, offering a portfolio ranging from small package to air, ocean and ground freight, logistics, brokerage and financial services.”
In related news, UPS announced Jan. 9 that it has agreed to buy 60 additional cargo-carrying A300-600 aircraft from European plane maker Airbus Industrie with a total list value of about $6 billion.
UPS, anticipating future growth outside the United States, said the order is the largest in the parcel carrier's 93-year history and is twice as big as its previous commitment in 1998 to buy 30 of the wide-body planes. The two orders combined commit UPS to buying 90 Airbus aircraft over nine years. The deal also gives the company options to buy 50 more A300-600s.
Airbus, based in Toulouse, France, also is close to landing an order from FedEx Corp. for as many as 10 cargo-carrying versions of its A380 aircraft with a list value of $2.3 billion.
UPS, which delivers an average of more than 13 million packages a day, will use its newest order of A300-600s as part of an expansion of capacity on shorter-haul routes in its international air network. While the routes to be flown by the planes have not been determined, UPS officials said they expect to use the A300-600s for flights within Asia, Europe and Latin America. Planes from the company's initial order will be used primarily between regional sorting hubs as UPS expands its domestic network.
UPS did not say when deliveries of the 60 new A300-600 aircraft are expected to begin, but it could be at least a few years from now, air-cargo experts said.
It is not surprising that UPS is eager to expand its international freighter fleet. International shipments are growing at a much faster rate than domestic deliveries, and rapid expansion of the world cargo market is expected to continue despite the recent economic slowdown.
UPS is also scrambling to increase its heft around the world, particularly in Asia. In November, UPS won preliminary approval to be the one new carrier to serve China under a bilateral agreement, and the company hopes to start its direct flights on April 1.