[LETTERHEAD]
For Immediate Release Contact: Gary Grahn
Chief Financial Officer
Mail Boxes Etc.
(619) 455-8991
MAIL BOXES ETC. ACQUIRED BY U.S. OFFICE PRODUCTS
San Diego, May 22, 1997 - Mail Boxes Etc., Inc. (NASDAQ: MAIL), the world's
largest franchisor of business communication and postal service centers
announced today that it has signed a definitive agreement to be acquired by U.S.
Office Products Company (NASDAQ: OFIS) in an all-stock "pooling" deal.
U.S. Office Products (USOP) will exchange one share of its stock for each share
of Mail Boxes Etc. (MBE) stock in the transaction (subject to adjustment in
certain circumstances). There are approximately 11.3 million shares of MBE stock
outstanding, valuing the transaction at $276.9 million, based on USOP's closing
price of $24.50 yesterday. At this price, the deal represents a 24.8% premium to
MBE's closing price of $19.625 yesterday.
Approximately 1.3 million in MBE employee stock options will be converted by
USOP to options to purchase USOP stock. The transaction is subject to various
regulatory and closing conditions, including the approval of MBE's shareholders.
"We are anticipating significant benefits from the proposed merger," said A.W.
(Tony) DeSio, MBE's founder, vice chairman and chief executive officer. "This
strategic relationship will create an entity that will be a strong competitor in
the marketplace for products and services required by small businesses in the
U.S. and abroad. The dynamic growth of small business formations in recent years
makes this market segment one of the most attractive targets for MBE and USOP's
joint marketing activities," said DeSio.
"This is a win-win deal for the shareholders of both companies, MBE's Franchise
Owners and for the millions of customers at Mail Boxes Etc.'s 3,300-plus
locations around the world," said Jonathan J. Ledecky, USOP chairman and chief
executive officer. "It brings USOP's buying power in office supplies, office
furniture, packaging supplies, coffee services, computer network services, print
and forms management, and travel services to the small office/home office (SOHO)
market, which consists primarily of businesses with less than 20 employees and
dovetails neatly with USOP's existing focus on the 25-500 employee middle-market
customer," said Ledecky.
"This strategic relationship creates a powerful alliance that will enable both
companies to achieve unprecedented growth worldwide," said James H. Amos, Jr.,
president and chief operating officer of
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MBE. "The significant synergies of process, systems, and people that exist
between our two companies will allow us to become the dominant force in
providing the products and services required by the rapidly growing SOHO and
small-business market throughout the world," said Amos.
Under the terms of the transaction, MBE will become a wholly-owned subsidiary
of USOP. MBE's corporate headquarters will remain in San Diego, and all
corporate officers will be retained. MBE franchisees currently sell more
than $1.3 billion in products and services to their customer base, and have
an installed base of nearly 500,000 postal box holders at their facilities
worldwide.
"The opportunities to sell our current range of products and services to the MBE
customer base is substantial," said Timothy J. Flynn, president and chief
operating officer of USOP. "Our vendors have expressed tremendous support for an
acquisition of this type, because they want to see additional channels of
distribution in the SOHO and small business market. The opportunity to drop a
USOP-based catalog of over 34,000 business products and services marketed under
the powerful Mail Boxes Etc. name into the 400,000-plus postal boxes of MBE
customers is an enormous opportunity. In addition, there are millions of other
small business customers who turn to MBE every week for help in achieving
business success. We think that USOP's menu of products and services will
ultimately help pull foot traffic into the MBE units and increase the revenues
and profits enjoyed by the MBE system," said Flynn.
"Prior to any potential major synergies, we expect that this merger will be
non-dilutive to USOP, based on joint earnings forecasts for both companies for
the fiscal year ending April 1998," said Donald H. Platt, USOP chief financial
officer. "MBE has no significant long-term debt and a very liquid balance sheet
that includes over $32 million in cash equivalents and nearly $60 million in
unleveraged assets. The merger of the two companies' balance sheets will enhance
USOP's financial ratios, while the approximate 25%-plus operating income margin
enjoyed by MBE will move our firm that much closer to our goal of an 8%
company-wide operating margin," said Platt.
"Because MBE does not have any central purchasing program for office and
packaging supplies for its franchisees, we believe the upside potential is
significant to USOP in this area alone," said Thomas Morgan, president of USOP's
North American Office Products Group. "We also believe that we will bring an
organized, wider in-store product selection and superior prices to MBE's
customer base, due to our purchasing power in the vendor community," said
Morgan.
"Our mutual opportunities are enormous," said MBE chairman Michael Dooling.
"USOP can now build on the joint marketing agreement we have forged with
Microsoft in the Internet marketing arena and help us aggressively market to the
47-million customer SOHO market. USOP will also have a powerful new shareholder
in United Parcel Service, which owns over 1.8 million MBE shares; in fact, the
combined USOP/MBE will be one of the largest customers of UPS delivery services
in the world," said Dooling.
"It's a tribute to the brilliance of MBE Founder Tony DeSio and MBE's innovative
franchisees around the world that Mail Boxes Etc. is synonymous with service to
the small business customer,"
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said USOP Chairman Ledecky. "It is our hope that by working together with Jim
Amos and his talented management team at MBE Headquarters we can build on Tony's
legacy and grow with the SOHO customer base. Our joint opportunity with MBE is
to enable the combined USOP/MBE to truly capture tomorrow's middle market
customer today," said Ledecky.
Mail Boxes Etc., headquartered in San Diego, is the world's largest franchisor
of business communication and postal service centers. MBE has more than 3,300
centers operating worldwide, with master licensing agreements in place for the
development of the MBE business in 52 countries around the world. MBE centers
are owned and operated by licensed franchisees of Mail Boxes Etc. or its master
licensees.
U.S. Office Products Company, is one of the fastest growing suppliers of a broad
range of office products and business services to corporate, commercial,
industrial and educational customers. Since its initial public offering in
February 1995, USOP has emerged as a leading consolidator of several highly
fragmented industries that serve the office needs of business and educational
customers. Since its inception, USOP has completed more than 165 acquisitions,
with current annualized sales of approximately $3.2 billion. USOP operates
throughout the United States, as will as in New Zealand, Australia, Canada and
the United Kingdom, selling a full range of more than 34,000 office and
educational products and services to its customers, and currently has over
15,000 employees.
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This press release includes "forward looking statements" that involve
uncertainties and risks. There can be no assurance that actual results will not
differ from the Companies' expectations. Factors that could cause such
differences include the pace and timing of acquisitions, the Companies'
abilities to realize cost savings and efficiencies, competitive and general
economic conditions, and other risks described in the Companies' filings with
the Securities and Exchange Commission.
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A CONFERENCE CALL TO DISCUSS THE ABOVE RELEASE WILL BE HELD AT 11:30 A.M.
EASTERN TIME TODAY. TO PARTICIPATE IN THIS CALL FROM THE UNITED STATES AND
CANADA, DIAL 1-888-836-6071 AND ASK TO BE INCLUDED IN THE U.S. OFFICE PRODUCTS
CONFERENCE CALL. CALLERS IN THE WASHINGTON, D.C. METRO AREA CAN DIAL
703-736-7362 TO BE CONNECTED WITH THE CALL.