FedEx rumoured to be buying part of Hermes

Hermes distribution Bremen

Negotiations to sell part of the German parcel express company Hermes are well advanced and press reports suggest that FedEx is likely to the buyer.

Hermes is owned by the German retailing conglomerate Otto Group. Presenting the company’s results on Wednesday (27/5) Chief Financial Officer Petra Scharner-Wolff confirmed that Otto Group was “looking for a strategic partner in order to make even better use of these very strong opportunities in the market, which at the same time is very investment heavy. We are talking to a number of interested parties and aim to get to a clear agreement in the fiscal year 2020-2021. The aim of the alliance is to expand the position as number two that Hermes holds in UK, Germany and France. In order to do so, we are willing to handover the majority in the respective Hermes companies”.

Neither she, nor the chief executive Alexander Birken, mentioned the names of any of the companies Otto Group was in discussion with, however, the German business newspaper Handelsblatt quoted “industry circles” who cited FedEx as the leading candidate. Handelsblatt also commented that the Hermes had been re-organised so that individual national companies in the UK, Germany and France had become more independent, possibly facilitating a sell-off of parts of Hermes. It suggested that the UK business could be bought by private equity company, Advent. The paper asserted that initially Otto Group was deterred from selling Hermes due to the likelihood of a low valuation. It does not own all of the property of its major hub locations.

Handelsblatt also said that Amazon and Alibaba had been involved in discussions with Otto Group about Hermes.  It is unclear who or what Handlesblatt’s sources are.

Hermes saw revenue increase by 9% year-on-year in the financial year 2019-2020, but the company has been investing heavily in new hubs in both Germany and the UK and thus may be struggling to get a satisfactory return on capital. FedEx has not commented on the rumours.

Source: Transport Intelligence

Author: Thomas Cullen