United Parcel Service, Atlanta, said yesterday that it has taken steps to create a publicly traded equity security.
UPS, one of the world’s largest privately held companies, will sell 10 percent of its common stock to the public carrying about 1 percent of the voting power. The remaining 99 percent will be retained by its current 125,000 shareowners, which include hourly and management employees and retirees. Under this plan, UPS will continue to be employee-owned and owner-managed.
UPS plans to use the net proceeds of the initial public offering to fund a cash tender offer to all current shareowners. The company expects to launch the tender offer within several months after the IPO. The transaction also involves a technical merger with a subsidiary that will enable UPS to become a publicly traded company. UPS anticipates the transaction will be completed by the end of the year.
A key goal of the offering is to position UPS for acquisitions.
“Today is a historic day for UPS,” chairman/CEO James P. Kelly said during a teleconference. “[Tuesday], our board of directors decided to take steps to build on our financial strength as a triple-A rated company by creating a public security that can provide us with greater financial flexibility to respond to changes in global market conditions, including the ability to make significant strategic acquisitions in important markets around the world.”
While Kelly was not specific about the types of companies the UPS intends to form strategic relationships with, he said “there are a lot of new competitors and we are entering into new markets. Certainly, there are electronic commerce opportunities, logistic opportunities, supply chain opportunities. In addition, there has been a lot of consolidation occurring, particularly in Europe, and we think we need this flexibility to provide ourselves with another tool should we decide to do the kinds of strategic alliance we talked about.”
UPS is currently competing fiercely with companies that are partially subsidized by postal organizations around the world. For example, UPS is pursuing a complaint against Deutsche Post in Europe, maintaining that it has been illegally and improperly using the money it gets from its First-Class monopoly to compete against private industry.
While the decision may not have a direct impact on direct markers right now, UPS said that “once this is done and we have public stock, it will make it easier for this company to grow, to enter into new partnerships and to offer new services,” said spokesman Norman Back. “In the brave new world we are in today, with the Internet and e-commerce, people don’t do deals in cash anymore — they do deals in stock, and stock is the one and only thing that we don’t have.”
Black said that if the UPS had dreamed up a new service that direct marketers would be interested in and UPS needed to acquire a company to help it roll out, it would use cash — but “today, sometimes, you start talking to people, and they don’t want cash. This is literally a move to develop some acquisition currency.”
UPS, founded in 1907 by James Casey, is the world's largest express carrier and largest package delivery company, serving more than 200 countries and territories. In 1998, it generated revenues of $24.8 billion from the delivery of more than 3 billion packages and documents worldwide.
