Regulators might not approve the deal, but the reality is that UPS, FedEx, and Amazon are in the same business. Inevitably, UPS and FedEx are going to want or need to merge in order to thrive. When and if that occurs, as tired industry behemoths get, they will do it exactly the wrong time.
The chart below highlights the relative price of FedEx and UPS since the IPO of UPS.
Since 1999, FedEx has made significant gains on UPS. However, the recent decline of FedEx since February 2018 and the recent reversal in September 2019 suggests that FedEx may have bottomed OR that UPS made be headed lower while FedEx treads water or rises.
For UPS, this is the ideal time to make an offer for FedEx as FDX lingers at 2005 levels. UPS being unwilling or unable to seize on FedEx at this time (too steep a price at any level) may be the opening for Amazon. Looking at the relative price of FDX/AMZN since UPS went public has the following skewed scenario.
Clearly, AMZN holds all the cards. If FDX and UPS can’t see this reality, they may be forced to merge under less ideal conditions. Regulators would be far more favorable to an acquisition of a “retailer” of a shipping company versus two shippers that are almost equals with significant market share.
Check the top ten air and ground shippers outside of these companies, there is going to be action in this group before long.