Absolutely, Positively No One's Safe by Michael Santoli
Summary: Steady growth numbers and exposure to the relatively stable ground and freight transport sector are two reasons shipping giant FedEx (FDX) could be attractive to potential buyers, says Streetwise editor Michael Santoli. With an enterprise value of $35 billion ($34b market cap and $1b debt) it's big, but recent buyouts of well-run large growth companies like First Data (FDC), Alltel (AT), Harrah's Entertainment (HET) and Hilton Hotels (HLT) suggest LBO firms are attracted to sturdy large-cap growth companies of its ilk. Recent hesitance in the LBO-debt market would not likely be an issue in a FedEx buyout considering its real assets, including 700 aircraft and 44,000 trucks. A full 70% of FedEx's $3.5 billion planned capital spending in 2007 is growth oriented. And FedEx's underperforming Kinko's unit is attractive to fix-it-up oriented private equity buyers. Even without a deal, shares are reasonable at 15x 2008e earnings. Rival United Parcel Service (UPS) faces another potential strike next year.
Conference call transcript: FedEx F4Q07