TNT accepts $6.7 billion offer from UPS

   TNT Express, a major global express delivery company, has agreed to an all-cash offer from rival UPS to buy the company for 5.2 billion euros ($6.77 billion) one month after rejecting an unsolicited acquisition bid of $6.4 billion, the companies announced Monday morning.
   The move would give UPS much greater access to the pan-European market, where it has gradually increased its presence since 1976 through a mix of joint ventures, partnerships and acquisitions of smaller courier firms, and puts it in position to challenge DHL on its home turf.
   The crown jewel in UPS’ takeover of TNT, which still must be approved by TNT shareholders and U.S. and European Union regulators, is TNT’s integrated air and ground network in Europe, especially its trucking operation. TNT also has large, but unprofitable, delivery networks within and between China, Southeast Asia and Brazil. The acquisition, however, extends UPS’ geographical reach and information technology platforms into those areas, and gives global shippers more logistics options.
   UPS is in the midst of a $200 million expansion of its Cologne, Germany air hub that will increase its package sorting capacity by 70 percent. The Atlanta-based integrated logistics provider has experienced compound annual export volume growth in the European market of more than 10 percent during the past 10 years. 
   A UPS buyout would also give TNT customers greater access to the North American market, where UPS and FedEx dominate. As an integrated logistics provider, UPS also intends to cross-sell its global freight forwarding and contract logistics capabilities, officials said.
   “With this combination, both UPS and TNT Express will significantly enhance their ability to serve our combined customers’ complex global logistics needs. The additional capabilities and broadened global footprint will support the growth and globalization of our customers’ businesses. At the same time, this positions us for future growth, which will benefit our employees and shareowners,” UPS Chairman and Chief Executive Officer Scott Davis said in a statement. 
   Transport Intelligence, a U.K.-based logistics research and analysis firm, estimates that a UPS-TNT tie up would give it a 35 percent share of the European international express market versus 39 percent for DHL. UPS would also become the dominant express and parcel carrier in countries such as the United Kingdom, Italy and France, it said.
   “By buying TNT, UPS has sent a clear message that it believes in the long term prospects of the European economy. We should not forget that combined economic output of the Europe Union is comparable to the U.S. in terms of GDP,” John Manners-Bell, Transport Intelligence’s chief executive, said in statement. 
   UPS said it plans to form a committee to manage integration of the TNT and UPS networks while maintaining service quality. It reassured TNT employees that it values the existing delivery infrastructure, but did not promise that there wouldn’t be any layoffs.
   When the transaction is finalized, almost 36 percent of UPS’s revenues will be generated outside the United States, compared to 26 percent today.
   Within four years, UPS said it plans to save between $525 million and $725 million per year from eliminating duplication in the two networks.
   The combination of two of the four largest package delivery companies creates a $60 billion logistics behemoth and puts huge pressure on UPS’ rivals. DHL, part of Germany’s Deutsche Post conglomerate, mostly has an air network in Europe and FedEx has very limited capacity to move packages and freight within Europe, according to analysts. 
   The latest UPS offer represents a premium of 54 percent of TNT’s share price since news broke Feb. 16 that TNT was negotiating to sell the company to UPS. UPS said it will pay for Netherlands-based TNT with $3 billion in existing cash and finance the difference.
   If certain preconditions to the transaction are not met, or the deal is blocked by regulators, UPS is required to pay a termination fee of 200 million euros ($262 million) to TNT. 
   TNT is allowed to terminate the deal with UPS if it receives a binding offer from a third party that is at least 8 percent greater than UPS’s price and is considered by the TNT board to be “substantially more beneficial to TNT Express” and UPS decides not to match the competing offer. Under those circumstances, TNT would pay a breakup fee of 50 million euros ($65.5 million) to UPS.
   Last year, TNT was divided into two companies, one which was TNT Express, and the other Post NL which focuses on mail, parcels and e-commerce in the Netherlands, in addition to Germany, Italy and the United Kingdom. In 2006 TNT sold its logistics division to Apollo Management. The business merged with Eagle Global Logistics and now operates under the name CEVA Logistics. — Eric Kulisch