I wouldn't be surprised if this came of amazon lowballing because they want to get (more) into Fedex's game.
The cost of shipping for Amazon isn't just the shipping cost - it's the opportunity cost of not scaling their own shipping business. I bet that's priced into their bid.
Similar goes for FedEx. If you're FexEx, you don't want more Amazon competition. You also like the scale/efficiencies from the Amazon business. So that puts their value of the deal at $$$_from_amazon + scale_efficiencies + amazon_not_in_your_game.
(I don't know what the marginal benefits of scale look like at that level - anyone know more on this?)
I could see FedEx better off taking a loss to keep the deal going. I bet either Amazon just tried to make that happen, or it's been happening for a while and there was just a change-over at Fedex.
The cost of shipping for Amazon isn't just the shipping cost - it's the opportunity cost of not scaling their own shipping business. I bet that's priced into their bid.
Similar goes for FedEx. If you're FexEx, you don't want more Amazon competition. You also like the scale/efficiencies from the Amazon business. So that puts their value of the deal at $$$_from_amazon + scale_efficiencies + amazon_not_in_your_game.
(I don't know what the marginal benefits of scale look like at that level - anyone know more on this?)
I could see FedEx better off taking a loss to keep the deal going. I bet either Amazon just tried to make that happen, or it's been happening for a while and there was just a change-over at Fedex.