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FedEx to Buy American Freightways

The move will enhance service provided by FedEx unit Viking Freight.

Updated from 10:03 a.m. EST


(FDX) - Get FedEx Corporation Report

, the world's largest express mail service, announced Monday that it would acquire regional freight carrier

American Freightways


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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.