FedEx Corp. has announced its agreement to acquire the LTL operations of Watkins Motor Lines and certain affiliates for $780 million. The deal would give the package delivery giant’s FedEx Freight unit a major national long-haul network, which will operate separately from its regional network.
The acquisition includes:
- 140 freight terminals in 42 states and Puerto Rico
- a workforce of 10,000 employees and owner-operators
- 1,800 tractors and 9,800 trailers owned by the company
- an additional 1,000 tractors and 1,500 trailers provided by owner-operators
- the assets of Watkins Canada Express
Watkin’s three-day or more long-haul service will be added to FedEx Freight’s next- and second-day regional LTL service to provide the company a full spectrum of LTL services. Watkins will transition to be rebranded as FedEx National LTL over two years, according to the company.
During a conference call with media and investors today, FedEx emphasized that this acquisition represents a market growth strategy—not a synergy strategy.
“It became clear to us when we started our focus on next- and second-day fulfillment for our customers we have to operate a very tight network to get maximum reach and maximum reliability for that service,” said Douglas Duncan, president & CEO of FedEx Freight. “To add a cost-effective [long haul] solution would have sub-optimized both [regional] networks so it really has to be a separate network.”
In addition, the acquisition of Watkins Canada Express gives FedEx Freight “a foothold into Canada” which that intend to expand upon. The Watkins Canadian operation was a “acquisition Watkins made a year ago [that’s] very small compared with the rest of company,” the company said in the conference call. Watkins Canada Express will be rebranded FedEx Freight Canada.
This deal reflects the continuing trend toward consolidation of the LTL industry. The FedEx’s regional network is primarily comprised of its acquisition of American Freightways and Viking Freight in 2001.
“FedEx had acquired two regional carriers and they do have long haul capabilities,” Chris Brady, president of Commercial Motor Vehicle Consulting told FleetOwner. “They weren’t designed for long haul. [FedEx] decided it’s cheaper to go out to buy somebody than to build it themselves.”
Last year, rival package delivery giant United Parcel Service acquired LTL carrier Overnite Corp. for $1.25 billion. UPS recently announced it will rebrand and reorganize Overnite and its truckload operation Motor Cargo into a single integrated network, UPS Freight.