Tuesday, December 30, 2003

FedEx buys Kinko's FedEx, the leading overnight service in the world, announced a buyout of Kinko's, the #1 copy center chain in the world, with 1,200 locations mostly in the US. Kinko's business includes photocopying, color printing, signage, document management, videoconferencing, and computer rental. The buyout will be for $2.4 billion. The majority holder of the company is private equity firm Clayton, Dubilier & Rice Inc. Kinko's has around $2 billion of revenue per year, while FedEx has $23 billion of annual revenue. Here's what seems to be behind the move: Overnight delivery is a mature market with little growth. UPS is increasing its share of the market and now that DHL has bought Airborne Express, it too may make inroads into FedEx's market share. Digital transmission of documents is starting to lower physical delivery, thanks to multifunctional scanners and PDF files. Kinko's has those facilities when needed. FedEx already has in-store centers at over 100 Kinko's stores, and they have been a success. FedEx gets a big reach into small business all across the country. FedEx plans to expand Kinko's locations in Europe and East Asia. That's announced as a top priority for FedEx, which also hopes to expand its overseas presence, The two operations should help market each other. The involvement of Clayton Dubilier is part of an interesting tren., That equity firm bought a big portion of Kinko's in 1997, with the idea of making it more profitable, then cashing out. Their oversight has now been for five (somewhat tumultuous) years in which they bought out some other investors to become majority owner; they were unable to unload the company since the M&A market went sour in the last few years. This deal lets them cash out, with a nearly $1 billion profit as well. This is all part of a pattern of equity firms acquiring loose properties, then selling their stake when an oligopoly is ready to buy. They make money by holding on to desirable properties, but have usually no intention to hold on them and manage them in the long run. They fill the timing gaps in the M&A marketplace. 7:39:52 PM

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