BREAKINGVIEWS-FedEx lockers deal stores up trouble

By Karen Kwok

LONDON, Feb 9 (Reuters Breakingviews) - FedEx FDX.N is stretching itself to reach the last mile. The delivery giant has teamed up with private equity firm Advent to buy InPost INPST.AS for 7.8 billion euros, or about $9.2 billion, to help itself and the parcel-locker operator expand in Europe. The financial logic stacks up more neatly than the strategic arrangement.

At 15.60 euros a share, the offer represents a roughly 50% premium to InPost’s price on January 2, the day before takeover talks surfaced. It values the Polish company lower than the 16 euros at which Advent took it public in 2021, but at about 10 times expected 2025 EBITDA it's broadly in line with Apollo Global Management’s recent acquisition of UK delivery firm Evri.

The buyers, which include InPost founder Rafal Brzoska and Czech investment firm PPF, have packaged up a nice deal. Assume InPost grows its roughly $3.5 billion in revenue 9% annually and sustains a 28% EBITDA margin, as figures compiled by Visible Alpha indicate. With estimated borrowing costs of 6.5%, a 25% tax rate and a sale at the same multiple in five years, the implied internal rate of return would be an impressive 26%, according to Breakingviews calculations.

Less comforting is the structure. If the buyout is potentially so lucrative, why is Advent sharing the spoils from a company it knows well? And if FedEx sees value in making better use of its network in Europe to compete with rivals such as DHL, why not buy InPost outright, or simply strike a commercial partnership as it intends to do? Antitrust considerations hardly seem enough to explain the unusual buyout pairing of an $87 billion publicly traded company with a private equity shop.

It suggests FedEx boss Raj Subramaniam is hedging. Locker networks are capital-intensive, operationally complex and evolving as a delivery-chain component. InPost depends on Poland for nearly half its revenue, but self-storage has not been as widely embraced across the continent. Only 18% of European shoppers prefer lockers for deliveries and 26% for returns, according to DHL, lagging home delivery and parcel shops.

The takeover timidity risks putting FedEx in an awkward spot. Advent answers to different sorts of investors and the founder's 16% stake enables him to swing strategic disagreements. When the time comes to cash out or buy control, Subramaniam also will probably find himself in a sticky situation. Agreeing to buy a minority stake may seem like thinking outside the box, but FedEx is more likely boxing itself in.

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CONTEXT NEWS

A consortium led by delivery giant FedEx and private equity firm Advent said on February 9 that it had agreed to buy InPost for 7.8 billion euros, or about $9.2 billion, to help the locker operator expand in Europe.

FedEx and InPost said they don't plan to integrate their operations, but intend to enter commercial agreements that give InPost customers greater access to FedEx's network.

Under the terms of the deal, the buyout group will pay 15.60 euros a share, a 50% premium to where they were trading on January 2, before takeover talks surfaced. FedEx and Advent will each own 37% of InPost while founder and CEO Rafal Brzoska will own 16% and Czech investment firm PPF 10%.

InPost said that shareholders representing 48% of the outstanding stock have backed the deal.