Daniel Loeb, the activist investor who has pushed for change at companies including Sony Corp., said his Third Point LLC has taken a stake in FedEx Corp., operator of the world’s largest cargo airline.
“We like the business,” Loeb said at the conference. “We think that they could better optimize their capital structure, pay a better dividend, and they’ve done that.”
FedEx is in the midst of a $1.7 billion restructuring program to lower costs and boost earnings with steps such as cutting air capacity to Asia, retiring older planes and offering employee buyouts. Smith, who founded the company in 1971, is under pressure to reduce expenses as customers shift towards less-expensive delivery options from overnight air shipments.
Loeb “may help with a management transition when Fred’s ready, to help identify key candidates,” Kevin Sterling, an analyst at BB&T Capital Markets in Richmond, Virginia, said in a phone interview. “When you’ve only had one person running a company for its entire life, that’s a big change.”
FedEx rose 1.6 percent to $134.63 at the close in New York. The stock gained 47 percent this year, giving the company a market value of $42.7 billion.
Jess Bunn, a spokesman for FedEx, confirmed in an interview that Loeb met with the company’s executives and said it is “a matter of routine business” to meet with shareholders.
Loeb, 51, didn’t disclose the size of his stake in FedEx.
Third Point, a hedge fund based in New York, was founded by Loeb and this year disclosed stakes in companies including Sony, Nokia Oyj (NOK1V) and Sotheby’s. Activist funds generally acquire equity stakes in companies and try to force corporate management and boards to make changes that boost share prices and investor returns.
Smith, 69, who holds the titles of president and chairman, hasn’t said who will succeed him or when he’ll hand over the top post. In a 2012 interview, Smith said he would remain CEO for “the foreseeable future” and wasn’t “planning on going any place.”
Sterling said that aside from helping with Smith’s succession, Loeb may not be as actively involved with FedEx as he has been in other companies, such as Yahoo! Inc., where he pushed for changes including recruiting Marissa Mayer to lead the company.
“I don’t know what kind of change he could drive at FedEx, they’ve already got all the heavy lifting behind them,” said Sterling, who has a hold recommendation for FedEx shares. “I almost see it as a passive investment.”
FedEx shares last month surged to highest since 2007 after authorizing its biggest stock repurchase program ever. The company reported profit that beat analysts’ estimates in the most recent quarter amid deepened cuts to air capacity.
The company’s FedEx Express unit, handling global air shipments, has borne the brunt of the customer shift to slower, cheaper methods of delivery. The business is FedEx’s largest division, accounting for about 60 percent of total revenue during the last quarter, and is the focus of FedEx (FDX)’s cost-reduction efforts.