Office Supply Firm Ascends Agency Top Tier

<I>Washington, D.C.</I> - U.S. Office Products has suddenly become one of the nation's 10 largest travel management companies following the purchase of Seattle-based Mutual Travel, Alexandria, Va.-based Cal Simmons Travel and Supertravel in Houston last week.

Combined with Denver's Professional Travel Corp., which it bought earlier this spring, the U.S. Office Products travel division has more than $600 million in annual air sales.

"This is the first of many acquisitions in our effort to build a $2 billion to $3 billion global network," said PTC president Ed Adams, who is heading U.S. Office Products' new travel division. "It will soon be $1 billion."

Washington, D.C-based U.S. Office Products, a two-year-old company whose core business is in office supplies, has purchased 160 companies since its inception.

The purchased agencies have a large percentage of corporate business. At PTC, companies represent about 85 percent of air sales, while at Mutual, the number is 80 percent, including meetings and incentives. They serve accounts such as U.S. West and Boeing, respectively.

Adams and Mutual Travel president Robert Dunlop stressed in an interview last week that the various agencies will retain their autonomy and regional focus under the parent company's umbrella, including their respective names and management groups.

"If we'd seen any indication that they were top-heavy, we would have had no interest in this deal," Dunlop said. "This is the only model we were interested in, and it hasn't existed before. What did exist was a national company absorbing a regional into its same corporate structure. This model is based on building the strengths of the regional agencies, staying close to customers and bringing to suppliers enormous negotiating volume--clients benefit from the best of both worlds."

Dunlop said the companies were focused on "bringing together an organization to compete head to head with the megas, who command more attention from airlines by virtue of their volume." Although both he and Adams downplayed the idea that they're trying to become a mega, they noted that without the negotiating volume, regional agencies cannot compete with the megas.

They also said the idea of consortia and other groups don't work because there's "no compelling reason to try to work together and eliminate redundancies," Adams said. "Corporate travel managers have experienced both megas and regionals and seem to, on balance, prefer regionals. This new travel division will have minimal corporate structure. We don't envision adding corporate staff, although we will need an airline negotiations person to make this work."

Adams said the presidents of U.S. Office Products agencies will form a council to share synergies in areas such as the millions each company has spent on technology.

Executives of the newly incorporated agencies own stock in the parent company, and more of this type of ownership will be encouraged. In fact, it is financing from that publicly traded stock that enabled the mergers. "U.S. Office Products' strategy is to own well-run businesses with an entrepreneurial spirit," Adams said. As a company with holdings including furniture, printing, computer systems and coffee, among other industries, "we'll have an opportunity to cross over with their tremendous customer base," he said.