FedEx to buy TNT for USD4.8b after UPS blocked in 2013

FedEx Corp. agreed to buy Dutch parcel-delivery company TNT Express NV for 4.4 billion euros (USD4.8 billion), predicting it can succeed where bigger rival United Parcel Service Inc. was blocked by regulators in 2013.
TNT investors will receive 8 euros a share in cash, 33 percent more than the closing price on April 2, the most recent trading day. UPS in January 2012 offered 9.50 euros for each TNT share before pulling out of the transaction a year later. TNT Chairman Antony Burgmans said the lower price in part reflects the fact that there will be fewer synergies with FedEx.
FedEx, calling the deal a “match made in heaven,” said the timing was right for the approach, with a stronger dollar and a budding European recovery providing the necessary support. FedEx has a chance to succeed where UPS failed as it has less overlap with TNT and has agreed to shed TNT’s airline operations in an effort to win approval. The companies said there is a “high level of deal certainty,” that it will be completed.
“FedEx will know the pitfalls UPS faced,” said Damian Brewer, an analyst at RBC Capital Markets in London, adding the price is in line with similar deals. While FedEx’s offer is lower than what UPS was prepared to pay at the time, financial metrics at the Dutch company have deteriorated since, he said.
TNT rose as much as 31 percent in Dutch trading while FedEx jumped 5.5 percent in pre-market trading in New York.
UPS scrapped its bid after European competition regulators moved to block the deal, arguing that it would limit some shipping customers’ choices for next-day deliveries to just UPS and DHL, a unit of Deutsche Post AG. The watchdog formally blocked UPS’s TNT bid because the Atlanta-based company failed to find a suitable buyer for parts of TNT to ensure that competition for delivery services wouldn’t be squelched.
Adding TNT will bolster the European ground network for FedEx, the operator of the world’s largest cargo airline. Expansion in Europe is one pillar of Chief Executive Officer Fred Smith’s 2012 plan to boost profit by $1.7 billion.
“We have long identified Europe as an area where we were focused on for growth because of our relatively small market share when compared to other parts of the world,” said Patrick Fitzgerald, FedEx senior vice president for marketing, in an interview. “It will drastically lower our costs to serve European markets by increasing density in our pickup and delivery operation.”
FedEx and TNT said they’re “confident that antitrust concerns, if any, can be addressed adequately in a timely fashion,” and that they expect to conclude the transaction in the first half of 2016. Mary Schlangenstein, Richard Weiss and Elco van Groningen, Bloomberg