FedEx Corporation and Clayton, Dubilier & Rice, Inc., jointly announced an agreement on Tuesday, December 30, 2003 , for FedEx to acquire Kinko's for $2.4 billion, payable in cash. WhatTheyThink attended the financial analyst conference call discussing the acquisition, and interviewed Kinko's Executive Vice President of Administration, Dan Connors, later in the day. (This interview will be published tomorrow.) A summary of the conference call is provided for our readers.

During the analyst call, FedEx reported that Kinko's acquisition is not expected to have a material impact on FedEx results for fiscal 2004 but is expected to be accretive to earnings in fiscal 2005, which begins June 1, 2004 . According to company executives, FedEx will fund the acquisition with $700 to $800 million from cash on hand and $1.6 to $1.7 billion from commercial paper backed by the company's $1 billion credit facility and a new $2 billion credit facility backed by JP Morgan.

FedEx declined to comment specifically on the accretive impact the acquisition will have on FY2005 earnings, stating that more detail would be provided when FedEx updates the financial analyst community later in the spring. The companies expect to be able to achieve additional synergistic economies of scale by leveraging FedEx's purchasing power to decrease Kinko's input costs, and capitalizing on Kinko's copying and printing services to decrease FedEx costs for those services. Even before these synergies, though, executives anticipate that the return delivered by this acquisition will greatly exceed FedEx's weighted cost of capital and drive up the company's overall returns.

No decisions have been made relative to closure of any FedEx or Kinko's sites where there is geographic overlap, although executives indicated that analysis would be ongoing, and with short-term leases in place at many Kinko's sites, any necessary adjustments of this nature could be made without negative financial impact.