U.S. Office Products to buy Mail Boxes Etc. Washington firm to pay $276.9 million in stock for largest private postal chain

WASHINGTON — WASHINGTON -- U.S. Office Products Co. said yesterday that it will buy Mail Boxes Etc. for $24.50 a share in stock, or $276.9 million, to expand into retail services aimed at small businesses.

The supplier of paper, services and coffee to companies and schools said it will exchange one share of its stock for each of Mail Boxes Etc.'s 11.3 million shares outstanding.


The buyer also will convert 1.3 million Mail Boxes Etc.'s employee stock options to its own stock options, it said.

U.S. Office Products has expanded quickly by acquiring more than 165 companies in contract stationery, corporate travel and computer network services.


Mail Boxes Etc., with 3,300 stores, is the world's largest retail postal, business and communications services chain. It will give U.S. Office Products a retail outlet for its products.

"Mail Boxes Etc. will be able to buy their office supply inventory through U.S. Office Products, and it gives U.S. Office Products access to the small business/home office market, which they haven't had before," said David Toung, an analyst with Argus Research.

Shares of Mail Boxes Etc. rose $3 to close at $22.625 in trading of 876,200 shares. U.S. Office Products' shares fell 87.5 cents to $23.875.

The Mail Boxes Etc. chain, headquartered in San Diego, is a franchiser of stores that provide mailbox rentals, parcel shipping and related services.

It will become a subsidiary of U.S. Office Products of Washington, D.C.

Jonathan Ledecky, U.S. Office Products' chairman and chief executive, said the company would use its buying power to drive down the cost of office supplies that Mail Boxes Etc. sells.

Now, many Mail Boxes Etc. franchises are buying those products from local office supply superstores and selling them primarily as a convenience to customers, he said.

"They're not looking at it as a core business opportunity," he said. "That's something the franchisees want direction on."


Ledecky said he expected a new office supply super store chain to emerge if Staples Inc.'s proposed $4 billion acquisition of Office Depot Inc. survives a federal antitrust challenge, reducing the number of superstore chains to two.

Although Mail Boxes Etc. retail sales were only $59.1 million in fiscal 1996, Ledecky said the acquisition might give U.S. Office Products a starting point to become that rival chain. "There's tremendous room for us to grow," he said.

The transaction, which is not expected to hurt U.S. Office Products' earnings, is subject to approval by regulators and the shareholders of Mail Boxes Etc.

Last week, U.S. Office Products' New Zealand unit, the Blue Star Group, offered NZ$65.2 million to take over McCollam Printers Ltd.

Mail Boxes Etc. had earnings of $8.7 million in 1996.

The company recently won an agreement with Banc One Corp. to install automatic-teller machines at 2,000 of its stores.


It also agreed to develop Internet-related services and products with Microsoft Corp.

Through that agreement, the company will offer fax and electronic mail over a Mail Boxes Etc.'s Internet access service. Customers can access the service via computer terminals in Mail Boxes Etc. stores.

Pub Date: 5/23/97