US Office Products to merge with Mail Boxes Etc. in stock-swap worth 3.95 times revenue

Weekly Corporate Growth Report, Jun 2, 1997

The Deal: US Office Products has agreed to acquire Mail Boxes Etc. in a stock-swap valued at $267 million. The move is designed to give the acquiring company access to hundreds of thousands of small business customers. The deal calls for US Office Products to swap one of its shares for each of Mail Box Etc.'s 11.8 million shares outstanding. The final value of the deal will be determined by the 20-day average closing price for US Office Products before the deal's close in August 1997. It currently stands at $267 million, based on US Office Products' closing price of $23.625. The transaction may be cancelled by Mail Box Etc.'s board if US Office Products' shares trade at an average below $23.

Discussion: With the proposed $4 billion Staples-Office Depot merger now under review for antitrust implications by a judge in Washington DC at the request of the Federal Trade Commission, the Mail Boxes Etc. deal does not come at the most opportune time in the rapidly consolidating office supply industry. Executives at US Office Products and Mail Boxes Etc. expect no government intervention, since the merger would have little competitive impact on the office supply industry.

Mail Boxes Etc. has grown to 3,400 franchised stores in 50 countries since being founded in 1982 It has helped popularize the idea of non-post office mail reception centers. Meanwhile, US Office Products has grown rapidly over the last two years on the heels of 167 acquisitions of small office suppliers.