Thursday, 9 April 2015 00:02
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AMSTERDAM (Reuters): FedEx Corp said this week it will buy Dutch package delivery firm TNT Express for 4.4 billion euros ($4.8 billion), aiming to take on bigger rivals United Parcel Service and Deutsche Post in Europe.
European regulators blocked a 2013 takeover of TNT by UPS due to concerns it would stifle competition.
FedEx...
But analysts and executives said on Tuesday FedEx, with its strong air fleet, would complement TNT’s expansive European road network.
“This (acquisition) will dramatically lower our cost to serve European markets,” FedEx Communications Vice President Patrick Fitzgerald said.
ING analysts estimated that Deutsche Post’s DHL currently has a 19% market share in Europe, followed by UPS with 16%, TNT with 12% and FedEx at 5%, meaning the deal would catapult FedEx to second place.
FedEx will offer eight euros in cash per ordinary TNT share – a33% premium on last week’s close – ina deal that will give TNT customers access to FedEx’s global distribution platform.
Memphis, Tennessee-based FedEx is financing the deal purely from debt - the latest company to take advantage of low interest rates.
The deal has been unanimously recommended by TNT’s supervisory board. TNT’s largest shareholder, PostNL, also said it would tender its 14.7% stake to FedEx.
UPS is fighting the decision by European regulators to block its 2013 bid for TNT, but has said it will not rebid for TNT regardless of the outcome. In a note to clients, ABN Amro wrote that UPS had said it wanted to make sure no precedent was set by the EU decision.
The regulatory block was damaging for TNT, which had been counting on adopting much of UPS’s logistics backbone.
TNT, whose European market share has slumped by as much as 5% since the UPS deal fell apart, has cut costs, sold operations and invested in its road network to hold on to customers in a weak European market for business package deliveries.
“There is no regulatory risk whatsoever,” said KeplerCheuvreux analyst Andre Mulder of the proposed deal, calling FedEx’s offer fair in view of TNT’s weaker market position.
A rival bid from Deutsche Post was unlikely because it would risk hitting the 30% European market share ceiling UPS ran into, he said.
“FedEx made a smart move and their rivals can do virtually nothing,” he added.
TNT warned in February it expected tough trading to continue in its main western European markets.
It forecast an operating profit for 2015 but expects at least 250 million euros in further restructuring costs over the coming two years.
