Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:
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 (NYSE: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 (NYSE:FDC), Alltel (NYSE:AT), Harrah's Entertainment (HET) and Hilton Hotels (NYSE: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 (NYSE:UPS) faces another potential strike next year.
Conference call transcript: FedEx F4Q07