FedEx Corp. is adding to its lineup of services by spending $120 million for a Wisconsin company that consolidates packages for catalog and Internet retailers and uses the U.S. Postal Service to deliver them "the last mile" to a customer's home.

Parcel Direct of New Berlin, Wis., will become a subsidiary of Moon-based FedEx Ground, the shipping giant's small package delivery unit, once the sale is completed, probably by the end of November.

FedEx shares fell slightly in New York Stock Exchange trading yesterday to 77.32, down 82 cents, or 1 percent. The company said the acquisition was not expected to have a material effect on its 2005 results. The sale is subject to regulatory review.

Key to Parcel Direct's business is a little-known U.S. Postal Service discount program called Parcel Select, which give price breaks to shippers that process packages and deliver them to bulk mail centers or post offices. The discounts are greater the further along the packages enter the Postal Service system.

"Our customers have been asking us to get involved in this market space for a long time," said Daniel J. Sullivan, president and chief executive of FedEx Ground. "This will add a new dimension to the overall Federal Express."

The acquisition is the second this year designed to extend FedEx's reach in the package delivery business. In February, FedEx completed a $2.4 billion purchase of Kinko's, the copy center company. It quickly put its shipping services into 1,100 stores that were renamed FedEx Kinko's.

FedEx purchased Kinko's after its prime competitor, Atlanta-based United Parcel Service, acquired the chain Mail Boxes, Etc., which were renamed The UPS Store. UPS also is taking advantage of the Postal Service's discounts as part of a new service it is marketing to select high-volume users called "UPS Basic."

Parcel Direct generated $250 million in sales in 2003, only five years after it was founded by Quad/Graphics, a privately held printer of magazines and catalogs. Its customers include retailers Eddie Bauer and the GAP, drug maker Abbott Laboratories and the Spiegel catalogue.

Parcel Direct targets large-volume retail customers that ship lightweight packages that do not require expedited delivery of the type FedEx already offers through its air and ground freight units.

Packages handled by Parcel Direct are taken to one of a dozen locations around the country where they are sorted by ZIP Code, shrink-wrapped on pallets and taken to the U.S. Postal Service for delivery.

"The whole trick here is to penetrate the postal entity as deep as we can," Sullivan said, noting that the Postal Service employs 300,000 carriers who deliver six days a week.

"This helps them when we can get small packages onto their routes," Sullivan said. "It's really kind of a win-win for both the consolidator as well as the Postal Service."

FedEx, based in Memphis, Tenn., has had a separate business alliance with the Postal Service since 2001, in which the Postal Service buys space on FedEx airplanes to transport express and first-class mail. FedEx located overnight service collection boxes in post offices.

Drew von Bergen, a spokesman for the 305,000-member National Association of Letter Carriers, applauded the Parcel Direct move as a potential job generator for postal workers. "It sounds good," he said.

Although Parcel Direct will continue to be based in Wisconsin, Sullivan said certain administrative functions would be moved to Pittsburgh over the next year without a loss of jobs in Wisconsin. That should create an undetermined number of jobs at FedEx Ground's headquarters in Moon, which employs 2,000 with another 200 at other local facilities.

Parcel Direct operates 12 package-sorting centers around the country, including sites opened this year in Philadelphia and Detroit. Plans are on the drawing board for a facility in Pittsburgh, but FedEx Ground spokesman Perry Colosimo said the timing of that expansion was under review.

"We fully expect to grow the business quite rapidly," Sullivan said. "I'm quite optimistic about our growth potential here."