UPS, TNT plan asset sales to clear EU antitrust hurdle

Monday, 3 December 2012 00:00 - - {{hitsCtrl.values.hits}}

AMSTERDAM (Reuters): United Parcel Service Inc (UPS) and its Dutch takeover target TNT Express NV submitted plans to meet European anti-trust concerns as they battle to keep the acquisition on track.

TNT Express shares have dropped sharply in recent weeks on concerns the deal could fall apart because of possible objections from the European Commission (EC). UPS and TNT Express said they planned to sell assets and open up their air flight operations but gave no details.

The European Commission (EC) is worried the 5.2 billion euros ($6.8 billion) takeover by UPS, the world’s No. 1 package delivery firm, would leave only two other big players, Deutsche Post AG’s DHL and U.S.-based FedEx Corp.

The Commission, Europe’s competition watchdog, last month warned UPS about the combined companies’ high market share and said it would seek concessions before it could approve the deal. Andre Mulder, analyst at Kepler Capital, said it was unclear how the proposed concessions would work in practice, in particular the opening up of the network, as this would require some competitors to change their overall logistics strategies.“We however doubt whether that is sufficient to please the EC. We remain negative on the chance of success,” Mulder said.The two companies did not say which operations and assets could be sold and did not name any possible buyers or users of their air flight operations. UPS has said that in addition to FedEx and DHL, its competitors also include national postal companies such as French mail group DPD and Royal Mail’s European express parcel service GLS, as well as freight forwarders like Swiss companies Kuehne & Nagel and Panalpina.

But divestments were widely expected for the deal to go ahead. Analysts had said UPS might need to sell some assets and restructure operations based on the overlap with TNT Express’s network as well as regulatory restrictions. TNT Express has conditionally sold its airlines operations to Dublin-based ASL Aviation Group, the Dutch company said two weeks ago. UPS, under European law, cannot own TNT’s airline operations as it is an American company. UPS has talked to FedEx and subsidiaries of France’s La Poste and Britain’s Royal Mail to sell assets or open its network to rivals, news agency Bloomberg reported.