FedEx's Strategic European Acquisition

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After United Parcel Service (NYSE: UPS  ) acquired TNT Express in a recent deal, many investors have been keeping a close eye on FedEx (NYSE: FDX  ) , as if waiting for an immediate reaction. And finally here it is!

FedEx reversed its earlier stance of opting only for organic growth in Europe, and decided to go down the acquisition road through its purchase of Opek Sp.z o.o., a small family-owned courier company based in Poland.

What's the deal?
FedEx is currently trying to increase its position in Europe where it has a meager 3% market share as opposed to UPS' 17% (after the TNT deal). FedEx is looking beyond international shipping in Europe and is now expanding its domestic ground shipping operations in the region. The Polish acquisition is just a part of this process.

Although the exact value of the deal is not known at present, it should not be a significant revenue addition for FedEx, given the fact that Opek has annual revenue of around $70 million. When you compare this to TNT's annual revenue (2011) of $7.2 billion, FedEx seems be getting a small slice of the European pie. But it's not the revenue alone that FedEx seems to be after.

Aspire to acquire
FedEx's current acquisition in Poland looks good for two specific reasons: Opek is one of the many family owned mid-sized companies which operate in a mature European market, making it an ideal acquisition target. At the same time, Poland has traditionally been one of the high-performing economies in Europe, making it a geographically attractive location.

In the past five years, FedEx seems to be setting a trend of making small but strategic acquisitions, and broadening its European presence in the process. For instance, in 2006 FedEx bought ANC Holdings, a U.K.-based express transportation organization, and followed it up with Flying Cargo Hungary in 2007, which enabled it to operate on a wholly owned basis in that country. FedEx also consolidated its operations in France and Germany in 2009 and 2010, which significantly boosted its European operations.

The Foolish takeaway
With industry rival UPS gaining a definite edge through its TNT Express acquisition, FedEx may have realized that organic growth alone was not enough to increase its negligible share in the European market. But the company has maintained a steady commitment to the continent, as evidenced by its 26 new stations opened all across Europe this year alone. Once you look at it from that angle, the Polish acquisition might just be a small yet steady step forward.

However, one event does not determine the prospects of a company. That's why it's important to watch the company closely. Add FedEx to your Free Watchlist for more analysis on this stock.

While the European economy is struggling currently, many companies, such as UPS and FedEx, are looking to diversify all over the world. For three more such global plays, check out our free report: "3 American Companies Set to Dominate the World." The report won't be available forever, so we invite you to get your copy today!

Fool contributor Navjot Kaur does not own shares of any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of FedEx. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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