FedEx Express to Acquire Express Business of Chinese Transportation Company DTW Group
Wednesday, 25 January 2006
FedEx Corporation announced that its FedEx Express unit had signed an agreement with Tianjin Datian W. Group Co., Ltd. (DTW Group) to acquire DTW Group's 50 percent share of the FedEx-DTW International Priority express joint venture and DTW Group's domestic express network in China for US$400 million.
FedEx and DTW Group entered into a joint venture agreement in 1999. JPMorgan acted as exclusive financial advisor to FedEx. PricewaterhouseCoopers acted as exclusive financial advisor to DTW Group.
The acquisition will include:
· DTW Group's 50 percent share in the International Priority express joint venture, converting the joint venture into a wholly FedEx-owned company;
· The DTW Group assets used to perform International Priority services; and
· DTW Group domestic express assets from 89 DTW Group locations.
Upon closing, FedEx will employ more than 6,000 people in China. The transaction is subject to customary conditions, including government approvals and licensing.
"China is changing the world's economic landscape, and FedEx has been part of this great change since we established express operations in China more than 20 years ago," said Frederick W. Smith, chairman, president and chief executive officer of FedEx Corp. "This strategic investment in the long-term growth of China will broaden and deepen our relationship by improving access to important markets, fueling economic development for years to come."
"Since we began our partnership in 1999, FedEx and DTW have created a standard of service unparalleled in China," said Wang Shusheng, chairman of the board and founder of DTW Group. "With China's rapid growth, its entry into the World Trade Organization, and the transformation of the business climate, the marketplace in China is developing rapidly. We are confident that this move will help position the company and its employees to take advantage of future opportunities in China." DTW Group will continue to operate international freight forwarding, general cargo transport and merchandise distribution businesses.
"This acquisition deepens our engagement with the China market. Our customers will benefit from seamless access to key areas worldwide, including China's second and third tier cities," said David L. Cunningham Jr., president, Asia Pacific, FedEx Express. "Cities outside the eastern seaboard, like Wuhan - which is itself twice the population of Los Angeles - are a crucial part of growing China's economy and vital to the long-term growth of FedEx in this region."
FedEx has embraced China's consistent progress in deregulating its market under World Trade Organization protocols. Reliable transportation networks are a critical part of the government's development plan and, as wealth spreads, must extend beyond major cities. The U.S.-China Business Council reported that a majority of China-based companies said gaps in China's transportation networks diminished their competitiveness.
Earlier this month, China reported that exports in 2005 reached a record US$762 billion, a year-over-year increase of 28 percent. Imports rose to US$660 billion, an increase of nearly 18 percent over the previous year. Total foreign trade in 2005 exceeded US$1.4 trillion, making China the world's third largest foreign trading power. It is the second largest domestic air cargo market in the world and is expected to be the fastest-growing market for air cargo, averaging more than 10 percent growth per year between 2003 and 2023.
"China's economy is expected to continue its extended cycle of strong growth, thanks to the pivotal role it plays in the global supply chain," said Gene Huang, FedEx chief economist and Shanghai native. "China's solid manufacturing base is essential to neighboring Asian economies, which export key electronic components. Its emerging middle class and growing consumerism will continue to attract capital goods and luxury items from the rest of the world."
Benefits for China
With this acquisition, FedEx will build upon beneficial relations it has established within China. The business experience gained from operating in this dynamic market will allow FedEx to better serve local businesses with an expanded suite of transportation solutions.
In this expanded role, FedEx employees will be able to contribute more fully in the communities where they live and work in China. FedEx has contributed hundreds of thousands of dollars in shipping and direct contributions to support causes such as health, education and the arts in China.
China also will benefit from the FedEx tradition of recruiting local employees and training them for management positions. In 2005, FedEx was ranked among the Top Ten "Best Companies To Work For" in China by Hewitt Associates. Of the FedEx Express-DTW Co., Ltd. managers in China, more than 80 percent are Chinese citizens.