FedEx announces takeover bid for TNT Express, in wake of failed UPS attempt.
Two years ago, we reported when UPS bought Dutch-based delivery company TNT Express. That deal was shot down by European regulators, who insisted parts of TNT be sold off to keep the combined company from having too dominant a market share and throttling competition in the EU market.
FedEx Corp. announced on April 7 a €4.4 billion ($4.8 billion) agreed takeover of TNT Express, hammered out in six weeks of negotiations, that will significantly boost FedEx's footprint in the European express market, particularly land transport, where it trails behind Deutsche Post DHL, TNT and UPS. The TNT deal "allows us to quickly broaden our portfolio of international transportation solutions to take advantage of market trends - especially the continuing growth of global e-commerce," FedEx CEO Fred Smith said.
With this new acquisition, the Dutch group must sell its two airlines, TNT Airways, which operates out of Liege, Belgium, and Madrid-based Pan Air Lineas Aereas, to comply with European Union rules that prevent a non-EU company from owning more than 49 percent of a European-registered carrier. TNT expressed confidence the FedEx bid will not encounter the regulatory difficulties that sank the UPS deal in early 2013.
FedEx's cash offer of €8 per share represents a 33 percent premium on TNT Express's current valuation, but is significantly below UPS's €9.50 offer. The euro's steep decline against the dollar in recent months has made the FedEx acquisition even less expensive. The lower price also reflects the fact that FedEx takeover will deliver fewer synergies than the UPS deal as the two companies' European operations are much more complementary.
UPS is challenging the EU decision to block its own bid in court, but TNT said it does not expect this will impact its deal with FedEx even if UPS wins the case.
The FedEx-TNT deal is appealing not only because of the cheaper price tag, but also because of the massive increase in market share that FedEx will witness in Europe. According to 2013 data, FedEx is one of the smallest logistics integrators in Europe with a market share of 5%. DHL leads with 19%, followed by UPS at 16% and TNT at 12%. Once the deal closes by the first half of 2016, subject to regulatory approval, FedEx would become the second largest logistics player in Europe.
And there will be less competition, fewer chances for shippers to get a "bigger bang" for their deliver dollar.