FedEx to Buy American Freightways

Updated from 10:03 a.m. EST

FedEx(FDX Quote), the world's largest express mail service, announced Monday that it would acquire regional freight carrier American Freightways (AFWY Quote) in a stock and cash deal valued at $1.2 billion.

Under the terms of the agreement, Memphis, Tenn.-based FedEx will exchange $28.13 in cash or FedEx stock per share of Harrison, Ark.-based American Freightways -- a nearly 61% premium based on Friday's closing price. The acquisition will expand FedEx's next-day regional freight service coverage in the Midwest, South, and Northeast, and form one of the country's largest ground freight units when combined with FedEx subsidiary Viking Freight, which has its strongest presence in the West.

"This acquisition is a perfect strategic fit that will give FedEx a unique competitive advantage, generating incremental volume and revenue that neither business could capture as a standalone," said Frederick W. Smith, chairman, president and chief executive of FedEx, in a statement Monday.

American Freightways finished up $10.13, or 58%, at $27.63. FedEx finished up 10 cents at $45.27.