UPS takeover of TNT Express collapses

Last updated: January 14, 2013 12:31 pm

By Matt Steinglass in Amsterdam and Alex Barker in Brussels

The proposed €5.2bn takeover of Dutch delivery group TNT Express by UPS has collapsed after the European Commission indicated it would block the deal.

The news sent shares in TNT Express down 49 per cent in early Amsterdam trading as the nine-month courtship appeared all but over, marking one of the biggest transactions that the commission has ruled against.

Although UPS sees no realistic prospect of the deal being cleared, formal termination of the agreement with TNT Express will occur once Brussels has officially blocked the deal.

A commission spokesperson said: “The commission will take its decision by February 5.”

The US logistics group had offered to sell assets in European markets to competitors – first to FedEx and then to French delivery company DPD.

But Europe’s antitrust regulator believed the takeover would have left many European markets with only two “integrators” – companies that combine air and road delivery capacities – leaving customers with too little choice. It concluded that gaps in the FedEx network in Europe would leave the combined UPS-TNT as one of only two groups serving many markets.

Brussels has only blocked 22 mergers and acquisitions deals since the introduction of merger control rules in 1989. Joaquín Almunia, the EU competition chief, would require the approval of the college of EU commissioners to block the UPS-TNT deal. However, it is extremely rare for a draft prohibition decision to be overturned.

UPS had been scrambling to put in place a package of remedies to win approval, which involved selling to DPD a portfolio of assets across Europe and giving it rights to buy space on the UPS airline. However, the deal was extremely complex and included a host of uncertainties, such as whether DPD had the capacity and will to challenge the likes of DHL and UPS in express delivery over the long term.

As a result of these concerns, Mr Almunia called for assurances on the terms of the assets sale and the intentions of the buyer – a demand that UPS and DPD had little time to address.

Scott Davis, UPS’s chief executive, said the company had “proposed significant and tangible remedies” for the commission’s concerns and that the transaction “would have been transformative for the logistics industry”.

UPS will pay TNT Express a break fee of €200m as a consequence of withdrawing the offer.

The failure of the deal is a blow to UPS’s ambitions to gain a stronger foothold in the European market.

It leaves TNT Express, the world’s fourth-largest parcel group, without a clear strategy. The company was created in a demerger from its former parent company TNT in 2011 – with the purpose of making a merger with UPS or FedEx attractive.

Bernard Bot, TNT Express’s acting chief executive, said the company would “focus on executing our existing strategy” and that the company would release a new strategic review “in due course”.

TNT Express’s sale of its airline to ASL Aviation, which was conditional on the merger’s approval, will be cancelled.

Shares in PostNL, the former mail delivery monopoly and the Dutch logistics group’s biggest shareholder, declined 33 per cent in Amsterdam.




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