July 25 2006 09:59 AM

This summer, United Parcel Service rocked the shipping and financial communities, not to mention their employees, when it announced its plan to sell 10% of its shares on the open market through a blockbuster IPO. UPS management has downplayed the move but it clearly will have a significant impact on the culture of the parcel giant. Management salaries are somewhat below what is offered by other large corporations, but their stock-incentive program has always provided a comfortable retirement for dedicated company managers. No longer will employees be required to hold onto their stock benefits until termination or retirement. They will be free to sell their shares on the open market, cashing in on their many years of diligent employment.
Why did UPS management decide to go public with their stock after 90-plus years of being one of America�s largest privately held companies? UPS stated the offering positions them for future acquisitions or �major moves� in the marketplace. Clearly, UPS is bolstering its financial arsenal for battle with the likes of FDX Corp. and the ever increasing number of aggressive postal agencies throughout the world, including our very own USPS. Wall Street analysts see this as an opportune time for Big Brown to cash in on the internet-crazed marketplace. With so much emphasis placed on e-commerce and deliveries to residential addresses, UPS is simply leveraging its dominance in this arena. It�s UPS and the USPS that deliver to residences, not RPS and FedEx. And Wall Street knows that.
UPS has its eye on the international market. 1998 was the first year that the company�s international operation earned an annual profit. UPS stated its intent on staying competitive in markets where postal authorities are using monopolies to subsidize other operations. This has been a constant concern for UPS with regard to the USPS� efforts in the parcel and express markets. Overseas, Germany�s Deutsche Post has significantly increased its presence with multiple acquisitions, such as the parcel division of Nedlloyd and the giant freight forwarder Danzas which, by the way, is one of UPS� European partners. And the Deutsche Post also owns a minority interest in DHL. So you can see why UPS has become a little bit concerned.
Clearly, UPS is planning some strategic acquisitions of its own. And you can expect them to have their pockets full of cash from the IPO when they go shopping for opportunities. Look out for the world�s largest transportation company to get even bigger. And many feel it will happen sooner than later. Who are some likely candidates? Airborne, DHL and TNT come to mind. Look for UPS to set its sights, and open its wallet, overseas. UPS has evolved into a global service provider. Now that they have finally made it into the black overseas, their mission must be to carve out their own piece of the international pie, particularly in Europe where rapid consolidation is occurring through the efforts of formerly government-owned postal companies.
United Parcel Service rocked the shipping and financial communities when it announced its plan to sell 10% of its shares on the open market. Regardless of what happens in the short term, as always, there will be several winners when the dust settles. For one, should they chose, UPS employee shareholders will be able to enjoy the fruits of their labor with the freedom to sell their shares to anyone. After 92 years, they are probably still pinching themselves. Secondly, companies who ship their products via parcel and express carriers will enjoy the economic benefits that accompany increased competition and market innovation. Sit back and relax, it will be fun to watch, no matter what transpires!