U.S. Gives UPS Nod for Cargo Service to China

The U.S. government gave final approval Wednesday for United Parcel Service Inc. to initiate air cargo services to China, and granted additional flights to the three other airlines servicing that route.

Separately, UPS said it agreed to acquire Fritz Cos., a San Francisco-based freight coordinator and customs broker, in a move that will bolster its international freight-management business.

The Transportation Department, which tentatively accepted UPS for China cargo services in November, granted it a total of six weekly round-trip flights from Ontario, Calif., and Newark, N.J., to Beijing and Shanghai via Anchorage.

The agency, in its announcement after the markets closed, also said UAL Corp.’s United Airlines can expand its U.S.-China service by two weekly round-trip flights, and Northwest Airlines Inc. and FedEx Corp. can each add one per week. The 10 slots were highly coveted as the number of round-trip flights on the U.S.-China route are limited.

UPS agreed to pay about $450 million in stock for Fritz, which has 400 facilities in more than 120 countries.

News of the deal sent Fritz shares surging $4.38, or 62%, to close at $11.41 on Nasdaq. UPS shares eased $2.50 to close at $58.50 on the New York Stock Exchange.

The acquisition is the first for Atlanta-based UPS, the world’s largest package delivery company, since it went public in November.

Under the deal, each Fritz share will be exchanged for 0.2 shares of UPS Class B common. UPS said it expected to issue about 7.4 million shares of Class B stock.

Fritz has had problems in recent years. In November, Chief Executive Raymond Smith quit after just five months on the job.

In 1997, an accounting problem resulted in a sharp drop in its profits forcing a shake-up of top management and prompting an update of the company’s computer system.