Fedex Turns Up Heat On Ups Package Hauler Cuts Deal With Parent Of Rps Inc.

Federal Express reaped a windfall of new business from the Teamsters strike at competitor United Parcel Service, and is now taking steps to hold on to those new customers.

The Memphis-based cargo airline announced plans Monday for a $2.4 billion acquisition that will put it more squarely in competition with UPS and increase FedEx’s involvement in the logistics side of business shipping.

FedEx said it is acquiring Caliber System Inc., the parent of RPS Inc., a trucking company that focuses on non-express shipments. FedEx specializes in express shipments and overnight service.

Federal Express said it will form a new holding company, FDX Corp., under which FedEx and Caliber will run separate but complementary operations.

“For the long-term basis, it’s good for both companies,” said Jeffery Pittsburg of Goldis-Pittsburg Institutional Services. “For 90 years, nobody pressed UPS. Well, guess what. It’s a new dawn.”

FedEx earnings more than doubled, to $143 million, for the financial quarter of the UPS strike in August, and RPS made out handsomely, too.

Caliber and FedEx said they expect to increase the pressure on their competitors by working together.

“The two companies serve markets that are totally complementary and it’s going to be great on both sides,” said Daniel J. Sullivan, Caliber’s chief executive.

While Federal Express and Caliber will continue to operate independently, their sales forces will work together, each seeking new customers for the other, FedEx founder Frederick W. Smith said in a telephone news conference.

The merger, Smith said, “will boost the volumes and traffic levels of both FedEx and RPS and allow more packages in the express and routine sectors at a higher yield than would have been the case with either company working independently.”

The merger, which is expected to be completed early next year, requires approval from government regulators and the shareholders of both companies.

Caliber shareholders will receive 0.8 shares of FDX stock for each share of Caliber stock. Federal Express shareholders will get one share of FDX stock for each share of FedEx stock.

The agreement between company officers was signed Sunday.

Federal Express had revenues of $11.9 billion at the end of its 1997 fiscal year in May. Caliber reported revenues of $2.7 billion as of Dec. 31, 1996.

Smith said the Caliber acquisition has been under consideration “for many years” and was not a direct result of union troubles at UPS.

But the merger will help FedEx and RPS hold on to new business they picked up during the strike and perhaps bring in some more, Pittsburg said.

“What FedEx is doing is becoming a more formidable foe to UPS,” he said.

UPS said it lost $600 million in business during the 15-day strike.