Leading freight carrier,
United Parcel Service, Inc.
) has announced its plans to buy two Costa Rican companies. These
are the small package delivery company, Union Pak de Costa Rica,
S.A. and brokerage company SEISA Brokerage. Previously, both
these companies were Authorized Service Contractors for UPS.
No financial terms of this deal was disclosed. UPS expects to
close the transaction by the year end. We expect the acquisition
to expand the company's global presence and thereby enhance its
According to market reports, UPS established its business in
Costa Rica in 1990 and has so far gained significant momentum in
the region. As per press release, the company's investment
in this market is based on favorable growth projection by the
International Monetary Fund (IMF).
According to IMF, Costa Rica's annual import and exports are
estimated to grow 7% annually over the next five years owing to
the country's trade agreements with Canada, China, Mexico and the
U.S. As a result, UPS foresees a potential opportunity in the
Costa Rican freight transportation market, which can generate
significant profitability going forward.
Over the years, UPS expects to expand in markets including
France, Latin America, Vietnam, China, and Korea. In sync with
this expansion spree, the company augmented phase 1 of its
European hub operations at Cologne/Bonn Airport in Germany to
increase capacity by 65%.
The expansion would cost about $200 million, with the entire
project slated to be completed in year-end 2013. Overall, UPS
projects capital expenditures of over $2.0 billion for the year,
which is concurrent with its capital spending estimate of 4% of
revenues over the next five years.
UPS, which operates with the likes of
Expeditors International of Washington Inc.
Radiant Logistics, Inc.
), retains a Zacks Rank #3 (Hold).
EXPEDITORS INTL (EXPD): Free Stock Analysis
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