FedEx Bids $4.8 Billion for TNT Two Years After UPS Deal

FedEx Corp. agreed to buy struggling Dutch logistics company TNT Express NV for 4.4 billion euros ($4.8 billion) to expand in Europe, two years after regulators blocked United Parcel Service Inc.’s own bid for the company.

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, the companies said in a joint statement Tuesday. UPS in January 2012 offered 9.50 euros for each TNT share before pulling out of the transaction a year later.

FedEx’s limited reach across Europe and the experience from the failed UPS deal may mean the U.S. shipper has a better chance to succeed than its bigger rival. TNT, whose management will stay in place after the change of ownership, plans to dispose of its airline operations to appease regulators.

“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. Before today, the stock had gained 8.4 percent in 2015 through April 2 in Amsterdam, while FedEx had fallen 4 percent this year through Monday, trailing the 1.1 percent advance for the Standard & Poor’s 500 Index.

Asset Sale

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.

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.

UPS Failure

PostNL NV, the main mail service in the Netherlands, agreed to tender its 14.7 percent stake, TNT and FedEx said. The postal service will get 642 million euros in cash for its stake and will use the funds to cut debt, it said. The company rose as much as 16 percent in Dutch trading, while German rival Deutsche Post rose as much as 0.8 percent in Frankfurt.

For TNT, completing the sale would mark success in its effort to find either a turnaround strategy or an alternative exit plan since the UPS bid fell apart. TNT competes in Europe against companies including Deutsche Post’s DHL Express unit.

TNT has been selling assets to bolster its finances and focus more on European overland transport. Struggling with four straight annual losses, the company shed its Dutch fashion operations in 2014 and an unprofitable Chinese trucking unit in November 2013.

FedEx has a history of buying smaller companies around the globe, including in Poland, France, South Africa and Brazil. In January, the Memphis, Tennessee-based company closed its most-recent major purchase, the $1.4 billion acquisition of product-return firm Genco Distribution System Inc.

“There will be many opportunities as we move through the deal” for cost savings, David Binks, FedEx’s head of operations in Europe, said in an interview. “We believe that we have very complementary networks. TNT have a very strong operation on the ground, and we have a good reputation in the air. We are very strong in the U.S., they are very strong in Europe.”

(Source: Bloomberg)