by Christopher Freeburn | April 24, 2013 11:16 am
FedEx (NYSE:FDX) will continue to carry Express Mail and Priority Mail for the United States Postal Service.
The company has won a $10.5 billion contract to extend the service for seven more years. It’s current contract expires this fall, Bloomberg notes.
However, the new deal may not be a sweet as its former arrangement. According to one estimate, FedEx received $1.6 billion from the Postal Service last year. FedEx did not reveal the exact terms of the new contract, but the term and price suggests that it will get $100 million a year less going forward.
The reduced price likely resulted from FedEx outbidding rival shipping service UPS (NYSE:UPS), which announced last year that it planned to bid aggressively for the contract. UPS is estimated to have generated just $126.4 million from Postal Service contracts last year.
Last year, the Postal Service lost almost $16 billion. The service is looking to pare services and close low-traffic post offices to cut costs.
Shares of FedEx climbed almost 2% in Wednesday morning trading, while UPS dipped slightly.
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