UPS makes 5.2 bn euro move for TNT Express

19th March 2012, Comments 0 comments

US express delivery giant United Parcel Service said Monday it would pay 5.16 billion euros ($6.77 billion) for Dutch firm TNT Express in a move analysts said aimed to take advantage of expanding markets a shift to road transport.

The deal is expected to put UPS ahead of rivals DHL and FedEx as it would strengthened its position in Europe and globally.

"The transaction will recreate a global leader in the logistics industry with more than 45 billion euros in annual revenues and an enhanced, integrated global network," UPS and TNT said in a statement.

The boards of the two companies, one headquartered in Atlanta, Georgia, the other in Hoofddorp on the outskirts of Amsterdam in the Netherlands, said they intend to support and recommend the offer.

TNT Express is a global player operating in more than 200 countries and maintains a leading role in the road freight network in Europe.

UPS is the world's biggest package-shipping group with annual revenues last year of $53.1 billion and 400,000 employees.

To tie-up the deal UPS raised its initial unsolicited offer from 4.9 billion euros in mid-February.

TNT Express posted a loss of 270 million euros last year which it blamed on restructuring costs. The latest offer represents a premium of 53.7 percent to the share price before takeover talks became public.

The takeover is based on an all-cash offer amounting to 9.5 euros per ordinary share. The price of shares in the target fell slightly to 9.44 euros per share in late afternoon trading on the Amsterdam Stock Exchange (AEX).

The deal also had the support of TNT Express' biggest shareholder, Post NL which owns 29 percent and stands to receive 1.54 billion euros through the deal, the statement said.

UPS and TNT Express said they hoped that the new entity would achieve annual cost savings of 400-550 million euros within four years.

"Service lies at the heart of this proposed transaction," UPS said. "Customers will have access to deeper product capabilities and broader reach through the expanded geographies served."

Analysts said the acquisition was a breakthrough for the US-based UPS in the European and global market and was part of UPS' strategy to focus on road transport as rising fuel costs and cut-backs made flying more expensive.

"People are switching from higher value air freight to road cargo which is cheaper but takes longer," said Keijser Capital analyst Nico van Geest.

"That is exactly why UPS is interested in TNT Express, which is much more involved in road cargo transport and they have a good network throughout Europe," he told AFP.

Van Geest said he believed UPS would also benefit from TNT's road transport network in countries around the globe including Brazil and Australia.

Figures released in 2010 gave UPS only 7.7 percent of the European express postal service share against TNT's 9.6 percent and FedEx's 3.3 percent and DHL (Deutsche Post), with the largest slice of 17.6 percent of the market.

"With UPS' acquisition of TNT, it (UPS) has found an economy of scale and will become number one in Europe, leaving behind DHL and FedEx," said Maarten Bakker, an analyst with ABN Amro.

He added should a counter-offer be made by UPS' main rival FedEx, it would just raise its offer and "FedEx will be outgunned."

Last month TNT Express said it had rejected a 4.9 billion euro ($6.4 billion) unsolicited offer from UPS but remained in discussions.

The deal, which still needs approval from competition authorities, will result in the group's combined revenue generated outside the United States jumping to 36 percent of the total, UPS said.

It "underlined UPS' longstanding commitment to Europe, where it has maintained a presence since 1976" and "enhances UPS's existing position in fast growing regions such as Asia-Pacific and Latin America".


© 2012 AFP

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