Activist investor Daniel Loeb said Tuesday that his Third Point hedge fund has taken a stake in FedEx Corp.
Loeb said he met with FedEx Chief Executive Fred Smith in Memphis, Tenn. last week and won't push for his ouster.
"We like the business," Loeb said at a conference in New York. "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 toward less-expensive delivery options from overnight air shipments.
Loeb "may help with a management transition when Fred's ready, to help identify key candidates," said Kevin Sterling, an analyst at BB&T Capital Markets. "When you've only had one person running a company for its entire life, that's a big change."
FedEx shares rose $$2.11, or 1.6%, to $134.63. The stock has gained 47% this year, giving the company a market value of $42.7 billion.
Jess Bunn, a spokesman for FedEx, confirmed that Loeb met with the company's executives and said it is "a matter of routine business" to meet with shareholders.
Loeb didn't disclose the size of his stake in FedEx.
Third Point, based in New York, was founded by Loeb and this year disclosed stakes in companies including Sony, Nokia 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 investors' returns.
Smith, who holds the titles of president and chairman, hasn't said who will succeed him or when he will 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 anyplace."
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," Sterling said. "I almost see it as a passive investment."
FedEx shares last month surged to the highest since 2007 after the company authorized 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% of total revenue during the last quarter, and is the focus of FedEx's cost-reduction efforts.Copyright © 2015, Los Angeles Times