FedEx to buy rival TNT Express

Written By Unknown on Rabu, 08 April 2015 | 20.24

A TNT van

US parcels delivery firm FedEx is to buy its Dutch rival TNT Express for €4.4bn ($4.8bn; £3.2bn) as it looks to expand its European operations.

In a joint statement, the companies said both management boards had reached a "conditional agreement".

FedEx has offered shareholders €8 per share, a 33% premium on TNT's closing share price on 2 April.

It comes two years after United Parcel Service (UPS) pulled out of a €5.2bn bid for the Dutch firm.

UPS pulled out of the deal following opposition from EU competition authorities, saying it saw "no realistic prospect" of approval for its bid from the European Commission.

Since then TNT has undertaken a restructuring programme, cutting costs, selling operations and investing heavily in its road network to hold on to customers in what has been a weak European market for business package deliveries.

FedEx warehouse - file pic

FedEx and TNT Express expect the deal to be completed in the first half of next year and say they are confident any European competition concerns can be overcome this time.

The European regional headquarters of the combined companies will remain in the Netherlands, while FedEx has promised to maintain the TNT Express brand "for an appropriate period".

Tex Gunning, chief executive of TNT Express, said: "This offer comes at a time of important transformations within TNT Express and we were fully geared to executing our stand-alone strategy.

"But while we did not solicit an acquisition, we truly believe that FedEx's proposal, both from a financial and a non-financial view, is good news for all stakeholders."

However, the terms of the takeover allow for a competitor to make an offer within the next eight weeks and for the current deal to be terminated if that offer exceeds the existing proposal by 8%.

TNT warned in February that it expected adverse trading conditions to continue in its main western European markets this year, as it reported a €196m annual loss on revenues which fell 3.2% to €6.6bn.

On a conference call for analysts, Fedex chief financial officer Alan Graf said he did not expect "significant" redundancies following the purchase of TNT.

Mr Graf said Fedex would invest "aggressively" in integrating the two firms and added that Fedex was "very confident" of winning regulatory approval.

Steven Gibson of SLG Economics told BBC World News that if Fedex successfully bought TNT, it would create a European rival to UPS and DHL, which have a "bit of a duopoly".

Mr Gibson said the combined company of Fedex and TNT would have about 17-18% of the market.

"That is below the threshold of about 30% that European regulators would normally use. However, there will be a pressure on TNT to sell off some of its airline operations," he added.

Fedex shares were 3.7% higher to $172.82 in early trade on the New York Stock Exchange, while TNT shares were up about 30% in Europe.


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