Video: FedEx keen on Kinko's staff and news service reports
updated 12/30/2003 12:45:54 PM ET 2003-12-30T17:45:54

FedEx Corp. has agreed to buy Kinko's, the giant chain of copy centers, in a $2.4 billion all-cash deal intended to extend the shipper's reach to smaller businesses, the two companies said Tuesday.

The purchase from private equity firm Clayton, Dubilier & Rice Inc. will allow FedEx, the world’s largest overnight package deliverer, to offer shipping services in all 1,200 Kinko’s stores, up from 134 currently.

"It will definitely improve our access for FedEx customers wanting to pack and ship, particularly more ground shipping outlets," FedEx Chairman and Chief Executive Frederick Smith told CNBC. "It's particularly important in the relationship that Kinko's has with small and medium businesses and mobile professionals."

Smith said such small and medium customers "tend to give us shipments which have very, very attractive and profitable profiles."

FedEx, based in Memphis, Tenn., said the purchase, expected to close early next year, would have no material impact on earnings for the current fiscal year and would boost earnings by an unspecified amount in fiscal 2005, which begins on June 1, 2004.

Kinko's which is privately held, has about $2 billion in annual revenue, compared with $23 billion for FedEx.

Gary Kusin, president and chief executive officer of Kinko's, said the deal is a "major opportunity" for the copy shop operator in part because it will bring it into contact with the typically larger customers served by FedEx. Kinko's also could expand further overseas, where it operates 110 stores, executives of the two companies said.

"We currently are the back office for hundreds and thousands of small and medium-sized sized businesses in the U.S. and around the world," Kusin told CNBC. "In addition to document management and other sorts of printing solutions for our customers, we will be able to offer them shipping solutions."

Smith said he expected integration of the two companies to go smoothly, in part because the two companies have had a close relationship since 1988, when FedEx became Kinko’s shipping provider.

The deal steps up competition with FedEx rival UPS, which recently rebranded its Mailboxes Etc. chain as The UPS Store, Morningstar analyst Nicolas Owens said in a note.  He said the combination would allow FedEx to capture some additional marginal shipping business.

Kinko’s, which employs more than 20,000 people, was founded in 1970 when Paul Orfalea, a recent college graduate, borrowed money to open a photocopy shop in Isla Vista, Calif. He called it Kinko’s after the nickname his college friends gave him because of his curly, reddish hair.

FedEx shares, which were off 1.8 percent in early trading, have risen 29 percent this year, from $54.22.

Reuters contributed to this report.

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