FedEx Freight Spin-off Plan: What We Know and Implications

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FedEx recently announced its plans to spin off FedEx Freight into its own separate publicly traded company within the next 18 months. This move, which will be completed through a capital markets transaction, is aimed at allowing for more customized operational execution and tailored investment and capital allocation strategies. FedEx expects this separation to qualify as a tax-free transaction for U.S. federal income tax purposes.

Raj Subramaniam, President and CEO of FedEx Corp., expressed his support for the decision, stating, “This announcement is a testament to the strength of the business our team has built and to our dedication to doing what’s best for our customers, our team members, and our stockholders.” FedEx Freight will retain its name and is projected to hire 300 LTL (less-than-truckload) specialists by the time of the separation.

FedEx Freight has performed strongly in recent years, recording revenue of $9.4 billion in fiscal 2024 and achieving nearly 25% growth in operating profit each year for the past five years. During the second quarter of fiscal 2025 ending on November 30, it generated revenue close to $2.2 billion.

As the largest U.S. provider of less-than-truckload services, FedEx Freight plays a crucial role in transporting multiple shipments from various customers on a single truck, which are then routed through a network of service centers for further distribution. Analysts believe that the spinoff could unlock significant shareholder value, potentially up to $20 billion, while enabling FedEx to concentrate on restructuring and enhancing long-term growth prospects for both its core package operations and the newly independent freight business.

Ahead of this announcement, FedEx reported its second-quarter revenue at $22.0 billion, with a slight decrease in operating income to $1.05 billion and net income to $740 million compared to the same period last year. The company attributed these results to lower-than-expected FedEx Freight revenue and profit, offset by cost-cutting measures under the DRIVE Program. This initiative, focused on improving operational efficiency in the U.S. and Canada, is expected to generate $600 million in cumulative savings in Europe by fiscal 2025 as compared to the fiscal 2023 baseline.

Despite challenges such as weak U.S. domestic demand and the expiration of the U.S. Postal Service contract, Subramaniam expressed confidence in the company’s transformation efforts. He stated, “Our second quarter results demonstrate that our efforts to transform our operations are working. The Federal Express segment delivered operating profit growth despite several headwinds.”

The decision to spin off FedEx Freight marks a significant milestone for FedEx’s strategic restructuring, paving the way for enhanced focus and growth opportunities for both segments of the business.

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