UPS expects to get rapid European Commission approval for its €5.16 billion acquisition of TNTExpress and will then gradually integrate the Dutch company in a four-year “customer-centric”
process that will ultimately end with the disappearance of the TNT brand, executives said today ata press conference.The two companies had earlier announced they had agreed on a recommended all-cash offer of €9.50per ordinary share for TNT Express, which valued the Dutch firm at approximately €5.16 billion($6.77 billion). TNT last month rejected UPS’ offer of €9 per share, which valued it at €4.9billion.
The formal offer is due in Q2, 2012, assuming “Phase 1” clearance by the European Commissionwithin a four-week period, with completion due in Q3, 2012.
UPS CEO Scott Davis said that TNT represented “a unique investment opportunity” and the offerwas a “very fair” valuation. “We have looked at TNT on and off over the years. Now is the righttime for us,” he commented. Davis stressed that the goal of the acquisition was to “create the bestexpress package company in the industry” and “a more global UPS”.
He highlighted the two companies’ complementary geographical strengths, with UPS’ US marketleadership and TNT’s strong European position. UPS generated about 74% of its €40 billion revenuesin the USA last year, with 14% in Europe, Middle East & Africa, and 12% in the rest of theworld. The combined company would have had revenues of €45 billion, with 64% in the USA, 22% inEMEA and 14% elsewhere, according to his presentation.
Davis stressed the two companies were “very confident” of regulatory clearance, with Phase 1clearance from the European Commission. It was “too early” to talk about potential redundancies, headded but emphasised that the integration would be an “evolutionary” process and UPS alwayspreferred attrition to forced redundancies.
Asked about the long-term future of the TNT brand, he responded: “The TNT brand is a valuablebrand…. Long-term, after many years, we will end up with one brand and that will be UPS.”
TNT Express CEO Marie-Christine Lombard told journalists it was “a difficult day and a greatday”. She stressed that the acquisition created “huge opportunities” and that the combined companywould expand into a global leader. “It’s a great strategic fit and a great strategic rationale.That’s why I support this deal,” she said. The acquisition also fitted with TNT’s recentlyannounced new strategy of focusing on Europe, she added. “The strength of TNT is in Europe.”
Asked about TNT’s loss-making business in Brazil and China, Davis said Brazil was a fast-growingcountry and UPS would encourage TNT to “keep Brazil and grow the business”, but it was “too earlyto say” with China. Lombard added that Brazil was now ahead of its turnaround plan while TNT waslooking at partnerships for China domestic.
UPS CFO Kurt Kuehn stressed UPS would take a “customer comes first” approach to integration ofTNT to ensure customer service remained “top priority”. “Service lies at the heart of thistransaction,” he declared. This “customer-centric” integration would delay some synergies, headded.
UPS expected to generate about €400 – 550 million worth of annual synergies by the end of thefour-year integration period and would spend about €1 billion in total on integration costs, hesaid. The main areas for cost savings would be in country operations, including pick-up anddelivery, hub and feeder operations, as well as the air networks, both intra-Europe andintercontinental, he added. Integration would be on a country-by-country basis, with productintegration preceding operational integration.
Asked about the future of TNT’s European air hub at Liege airport in Belgium given UPS’expansion of its own air hub at Cologne, Dan Brutto, head of UPS International, responded: “Rightnow we intend to keep Liege up and running. Liege is critical.” Davis, however, added: “Colognewill be our major air hub going forward.”
Brutto also stressed the importance of TNT’s Dutch operations, including the European roadnetwork hub, and said the location of the European head office would be decided at a later date.TNT was also strong in several regions where UPS was “under-represented”, including Brazil,Australia and the Middle East,” he noted.
