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FedEx Buys U.K. Shipper

The deal for ANC Holdings is worth $234 million.
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Updated from 9:21 a.m. EST



said it has acquired the British express company ANC Holdings for $234 million, enabling it to directly serve the British domestic market.

ANC has annual revenue of about $283 million and offers a range of distribution and logistics services with an established pick-up and delivery network across the UK. It has about 4,500 employees and a fleet of 2,200 vehicles based at 80 locations.

"The addition of ANC significantly expands our service portfolio in the important U.K. market and underscores our continuing commitment to grow the FedEx international business," said Michael Ducker, president, International, FedEx Express.

U.K. businesses increasingly demand bundled transportation offerings, said Robert Elliott, president of Europe, Middle East, Africa and the Indian subcontinent for FedEx Express.

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"As the U.K. market continues to evolve and expand, customers increasingly seek a single provider of solutions for their domestic and international shipping to more efficiently manage their global supply chains," he noted.

ANC's management will remain in place and report directly to Elliott. As part of the transaction, ANC shareholder LDC, the private equity division of Lloyds TSB Group, will exit its investment.

Merrill Lynch analyst Ken Hoexter said the acquisition won't end speculation that FedEx may want to buy the Dutch package delivery company TNT.

"We think TNT would be a logical choice for FedEx to establish a presence in Europe," Hoexter wrote in a research report. "

However, the ANC acquisition, while small, positions FedEx with local expertise should they decide to build out assets on the ground instead of a large-scale acquisition."

Merrill Lynch has a financial relationship with FedEx that includes providing investment banking services and acting as a market maker.

"FedEx had abandoned building out a domestic network in Europe some years ago, as it had moved to primarily focus on Express deliveries," Hoexter said.

He noted the deal would add less than 1% to FedEx's annual revenue and wouldn't affect earnings in fiscal 2007. However, he increased his estimate for fiscal 2008 by 5 cents to $7.75 a share.