TNT today announced it will sell its underperforming 3.4 billion euro logistics business in amajor change of strategy. The Dutch group also unveiled express acquisitions in China and Spain,
along with a one billion euro share repurchasing plan designed to head off any hostile takeoverbids.Announcing the results of a strategic review, TNT said it would focus in future on mail, expressand freight transportation through its worldwide network. TNT Logistics, the world’s second-largestcontract logistics provider with turnover of some 3.4 billion euros, would be sold by the secondhalf of 2006. TNT said it aimed to sell its logistics division to a new owner with “a clear focuson growing and investing in the franchise”. The group would retain some logistics activities thatfitted the core network strategy, including the In-Night and high-tech spare parts operations withcombined annual revenues of some 300 million euros. TNT Freight Management, representingapproximately 800 million euros in annual revenues, was an essential element of TNT’s globalnetwork, connecting in particular Asia and Europe, and was therefore not part of the activities tobe sold, TNT stressed.
Peter Bakker, CEO of TNT, explained: “In reviewing our existing strategy we have come to theconclusion that high-quality networks have proven to be intrinsically more attractive than customerdedicated supply chains. In networks like Mail, Express, and Freight Management, TNT can driveincreased volumes across infrastructures resulting in continually improving efficiency, operatingleverage, and higher return on capital.”
“It is clear that we are successful at designing, implementing and running delivery networkbusinesses. This is our core competency, lies at the heart of our business going forward, andoffers us a sustainable competitive advantage and very compelling growth opportunities. We havevery strong network platforms to build on – particularly our fast growing Express and European MailNetworks (EMN) businesses and our profitable Mail Netherlands business. To underline this, werevise our revenue growth expectations for our Express division upwards to the 10 – 15% range overthe medium term versus “high single digit” previously. Additionally, we believe total revenues ofour EMN businesses will amount to approximately
1.7 billion euros, at an operating margin of 10 per cent, in 2012.”
On the decision to sell most of TNT Logistics, Bakker said: “While our logistics business is astrong operation with a talented group of employees and good customer relationships, it will nolonger fit with our strategic focus going forward.” In particular, synergies between the logisticsand express businesses had not materialised sufficiently.
TNT said that the new strategy also enabled it to optimise its capital structure. The groupwould return capital to its shareholders by repurchasing ordinary shares over the next four months.The repurchase program will be financed from available cash and committed bank facilities. Giventhe share buyback value of € 1.0 billion, the approximate number of ordinary shares to berepurchased under the repurchase program is 42.6 million, calculated on the basis of the last tradeprior to commencement of the repurchase program.
Industry observers noted that the share repurchase programme could assist the company to fightoff any hostile takeover bid. There has been speculation that UPS might make a bid for the company.German financial investor Cornelius Geber confirmed last month he was trying to put a consortiumtogether to make a bid for the company.
