United Parcel Service, the world’s largest package-delivery company, agreed to buy Overnite Corporation for $1.25 billion in cash, putting it in direct competition with FedEx for shipments of larger goods by truck.

UPS will pay $43.25 for each share of Richmond, Va.-based Overnite, a 46% premium over its closing price on May 13. UPS, which carries mainly small packages in its trucks, is hoping to gain business from retailers and other commercial clients that want to ship freight across America.

The purchase will allow UPS to make land shipments of packages that can’t be lifted by a driver, as FedEx’s freight unit already does. Atlanta-based UPS in December began assembling an airfreight network with its purchase of Menlo Worldwide Forwarding, and announced plans to build five American airport hubs to handle freight.

“This deal is directly related to FedEx’s success with their freight division,” said James Corridore, a Standard & Poor’s analyst who rates UPS a hold and doesn’t own the shares. “This certainly fills out a competitive niche that they were lacking.”

Overnite shares rose $12.94 to $42.52 yesterday in Nasdaq composite trading. UPS shares gained $1.03, or 1.4%, to $73.18 on the New York Stock Exchange. Standard & Poor’s said it may raise Overnite’s BBB rating, and affirmed UPS’s AAA rating. Moody’s Investors Service affirmed UPS’s Aaa ratings, and put Overnite on positive outlook.

UPS is buying Overnite at a time when transportation companies are benefiting from record imports driven by demand for Asian goods. The rise in shipments has begun to overwhelm ports on the West Coast. Imports from Asia, led by toys, textiles, and other goods, rose 22% in February, according to government statistics.

By adding Overnite’s fleet of 6,700 tractors and 22,000 trailers, UPS will be able to take an item such as a commercial freezer and ship it overnight across the country. It hasn’t had the capability to handle such large items until now.

The purchase will immediately add to earnings when it is completed in the third quarter, UPS Chief Financial Officer Scott Davis said in a conference call with reporters. UPS has been evaluating potential combinations with truckers for “many years,” and decided to make the offer now in part because of a rise in mergers in the industry, he said.

The purchase is the second acquisition of a publicly traded trucking company announced this year, following Yellow Roadway’s agreement to buy USF for $1.37 billion in February.

“Overnite in particular is a pretty good company,” Mr. Corridore said. “In general, freight has been very strong.” FedEx, based in Memphis, Tenn., created its freight unit in 2001 after buying Viking Freight in 1998 and American Freightways in 2001. FedEx Freight had sales of $2.7 billion in its last fiscal year.

Overnite, which was spun off from Union Pacific in 2003, transports goods belonging to more than one customer on each truck. The company serves cities in America, Canada, Puerto Rico, Guam, the Virgin Islands, and Mexico. Its customers include the retail, chemical, automotive, electronics, and furniture industries.

Two-thirds of Overnite’s business involves overnight and second-day deliveries, Mr. Davis said.

The U.S. less-than-truckload industry is a $62 billion market in terms of annual sales, according to Andrew West, Standard & Poor’s trucking analyst.

“This is an important capability that we needed to have,” Mike Eskew, UPS’s chairman and chief executive officer, said in the statement. It’s UPS’s biggest acquisition since it raised $5.47 billion in an initial public offering in 1999.

Regional less-than-truckload carriers have grown as customers have sought to lower costs by stocking less inventory and as trucking has become more efficient. FedEx Freight is the largest less-than-truckload carrier, based on daily shipments, said Doug Duncan, chief executive of the FedEx unit.

“In years past, the freight trucking industry was looked at as kind of slow,” Mr. Duncan said.

The premium UPS is paying for Overnite is the second-highest among 65 domestic mergers and acquisitions of more than $1 billion this year, according to data compiled by Bloomberg. Yellow Roadway is paying a 39% premium, according to Bloomberg data.

“UPS needed a heavy freight carrier in light of the changes that have come about in the industry,” said Satish Jindel, president of Pittsburgh-based SJ Consulting Group. “The premium is a little on the high side, but it’s a good carrier. There aren’t too many other good choices for UPS.”

UPS is trying to grow outside the package business because it believes the domestic parcel market is more mature and more competitive than at any time in the past 25 years, leaving limited opportunities to grow.

Overnite will operate as a separate company under UPS, and current management will remain in place. UPS’s Supply Chain Solutions services include customs clearance and trade assistance, inventory and distribution oversight, and consulting.

UPS had $5.2 billion in cash at the end of March.

UPS is investing in an industry where returns are about 50% less than the company typically records, said James Valentine, a Morgan Stanley analyst. Less-than-truckload companies return about 5% to 10% on their investments, while UPS’s return is about 20%, he said.

“I question the logic of the acquisition,” said Mr. Valentine. “I think shareholders would have been better served by the company returning the cash to shareholders or investing in higher returning businesses.”

Overnite is a non-union company. The Teamsters staged a three-year strike against the company while it was part of Union Pacific before settling a contract shortly before the 2003 spin-off.