NEW YORK (CNNfn) - FedEx Corp. agreed Monday to acquire American Freightways Corp. for $950 million in cash and stock, expanding FedEx's reach into regional delivery markets .|
FedEx (FDX: Research, Estimates) will make a cash tender offer of $28.13 a share for up to half of American Freightways' 32.4 million outstanding shares, nearly a 61 percent premium over American Frieghtways' closing share price Friday of $17.50. Once the tender offer is complete, American Freightways will merge into a unit of FedEx, and each AF share will be converted into a FedEx share at $28.13 each.
FedEx also will assume about $250 million in debt. The boards of both companies have approved the purchase, but AF shareholders still must agree to the sale, which is expected to close in first quarter 2001.
Harrison, Ark.-based American Frieghtways (AFWY: Research, Estimates) is a trucking company that handles pallet-sized shipments of freight from numerous customers in the same truck, a sector of trucking known as less-than-truckload. It serves 40 U.S. states, mostly in the Midwest and the East Coast. Fed Ex, which already owns Viking Freight, will now extend its reach for regional freight services to 48 states.
Viking, which was acquired by FedEx as part of its 1997 purchase of Caliber Systems, was the only unit of the company that did not have national coverage. Many analysts believed that FedEx would sell it at some point to focus on its other business units, and many saw American Freightways as a potential buyer. But FedEx decided to go the other way and create what is essentially a new national LTL carrier. FedEx Chairman and CEO Fred Smith said, with the addition of American Freightways, the company now can provide another segment of customers' freight transportation needs. (273KB WAV) (273KB AIFF)
Viking and American Freightways overlap in several areas including Alaska, Arizona, Colorado, Hawaii and New Mexico but neither firm currently directly services Montano or Wyoming.
The purchase will create the one of the largest LTL freight unit in the United States., with revenue of more than $1.6 billion. Viking and American Freightways will continue to operate independently and each will maintain its own sales force, Smith said on a conference call open to analysts and media.
Viking once tried to join with three other regional carriers to form a national carrier, but the effort failed and the company had to close or sell operations in most of the country in early 1997. That was part of the reason Caliber was forced to sell to FedEx.
The purchase will be nominally accretive to FedEx's earnings for 2001 but will add about 3 percent to 5 percent in fiscal 2002, FedEx executives said.
Viking and American Freightways also will maintain separate regional operations in the Midwest and the East.
"This is an exciting time for the American Freightways team," its CEO Sheridan Garrison said. "This couldn't come at a better time. Viking and American Freightways match up perfectly."
American Freightways's Garrison will become the thirteenth member of FedEx's board and serve as chairman emeritus of American Freightways. Tom Garrison will continue as president and CEO of American Freightways.
FedEx shares lost 72 cents to $44.45 in midday trading Monday while American Freightways gained $10.06 to $27.56.