FedEx buying Kinko’s

Tuesday, Dec. 30, 2003 | 11:18 a.m.

SUN WIRE REPORTS

Kinko's has eight locations in the Las Vegas Valley with 125 employees.

FedEx has 230 drop boxes throughout Southern Nevada. It also has two "World Service Centers" within local Kinko's stores that are staffed with FedEx employees. FedEx has a freight depot on Lamb Boulevard that was expanded this year and an operation at McCarran International Airport.

MEMPHIS, Tenn. -- Shipping giant FedEx Corp. agreed to buy copy shop chain Kinko's for $2.4 billion in cash today, in a deal the companies said would vastly expand FedEx's retail presence and make Kinko's "a one-stop back office" for small- and mid-size businesses.

"The FedEx and Kinko's combination will substantially increase our retail presence worldwide and will enable both companies to take advantage of growth opportunities in the fast-moving digital economy," said Frederick W. Smith, chairman, president and CEO of FedEx Corp.

Memphis-based FedEx runs the world's largest cargo airline, FedEx Express, as well as well as FedEx Ground trucking operations for business to business and home deliveries. Kinko's is the leading provider of copying and other business services and has annual revenue of $2 billion and is cash fat, FedEx said.

FedEx already has drop boxes at Kinko's and full counter services at 134 stores. When the transaction is completed, FedEx will have full service at all Kinko's.

FedEx said it was particularly impressed with Kinko's recent growth in digital services and its place as an "office away from home" for traveling executives, offering computer access, meeting rooms and other such services.

"We currently are the 'back office' for hundreds of thousands of midsize businesses in copying, printing and computer services," said Kinko's Chief Executive Gary Kusin, who will remain in that position and report to Smith.

Joining FedEx will make Kinko's "a one-stop back office," he said.

Kinko's offers services such as video conferencing, e-mail and wireless Internet access that aren't available at other mailing stores.

Half of Kinko's business comes from small to medium companies, but business from larger corporations has increased to 20 percent and is growing, Kusin said. The rest of Kinko's business comes from walk-in customers.

Kinko's has 1,200 locations "including more than 110 stores in international markets where FedEx currently has a limited retail presence," Smith said. And FedEx plans to "dramatically expand" the number of Kinko's stores overseas.

FedEx said the Kinko's acquisition would begin to add to its bottom line this summer.

Shares of FedEx dropped $1.26 to $68.68 at midday on the New York Stock Exchange, where shares of rival UPS fell 23 cents to $74.58.

Atlanta-based UPS acquired Mail Boxes Etc. in 2001 and earlier this year announced plans to rename the 3,330 Mail Boxes Etc. franchises across the country The UPS Store.

Kinko's, which will become the fourth operating company for FedEx, will maintain its Dallas headquarters. No decision has been made on whether Kinko's will keep its company name, FedEx said.

The buyout firm of Clayton, Dubilier & Rice Inc. now owns 75 percent of Kinko's. When the transaction is completed -- which is expected in the first quarter of 2004 -- FedEx will own 100 percent of Kinko's.

"This acquisition is all about access to small businesses that don't have their own shipping and receiving departments," said A.G. Edwards analyst Donald Broughton, who rates FedEx shares "hold" and doesn't own them. "The small customers, which can have the highest profit margin, clearly are the target."

Smith said FedEx will expand shipping and package services to small business, especially those with employees who travel frequently. An estimated 20 percent of workers at U.S. businesses travel on a typical day, said FedEx Executive Vice President Mike Glenn.

"It expands our relationship with small and medium-sized customers, which is very significant to us," Smith said in a televised interview with Bloomberg News.