UPS and TNT Express this morning announced an agreed €5.16 billion deal to create a new globalexpress and logistics leader after weeks of negotiations, with PostNL agreeing to sell its 29.8%
stake in TNT to UPS.The two companies said they had reached agreement on a recommended all-cash offer of €9.50per ordinary share for TNT Express, representing a premium of 53.7 per cent to the unaffected shareprice of TNT Express of €6.18 on February 16, 2012, the day before TNT Express and UPS announcedtheir on-going discussions.
The transaction valued TNT Express at approximately €5.16 billion ($6.77 billion). UPS willfinance the deal by utilizing $3 billion in existing cash on balance sheet and through new debtarrangements.
The TNT Express Executive and Supervisory Boards unanimously intend to support and recommendthe offer, the companies said.
The combination of UPS and TNT Express will create a global leader in the logistics industry,with annual revenues of more than €45 billion ($60 billion) and will deliver significant benefitsfor the shareowners, customers, employees and other stakeholders of both companies, they said.
Together, UPS and TNT Express will offer customers an enhanced, integrated global networkthat will provide greatly enhanced service to customers throughout the world. In addition, the twocompanies are a strong cultural fit given their intense focus on customer service, operationalexcellence, employee engagement and good corporate citizenship.
The proposed transaction will accelerate UPS’s growth strategy and increase its geographicdiversity and ability to provide customers comprehensive solutions. UPS currently estimates annualrun-rate pre-tax cost synergies of approximately €400 to €550 million ($525 to $725 million) ayear, achieved by the end of the fourth year after closing. UPS believes that the cumulativepre-tax implementation costs related to achieving these synergies will be approximately €1 billion($1.31 billion) over the four-year integration period.
UPS and TNT Express believe this transaction will significantly enhance their ability toserve their customers’ complex global logistics needs. Following the transaction, around 36 percent of the combined group’s revenues will be generated outside the United States, up from 26 percent today at UPS. The combination underlines UPS’s longstanding commitment to Europe, where it hasmaintained a presence since 1976, by strengthening its product capabilities through the addition ofTNT Express’ leading Intra-Europe road freight network. The combination also enhances UPS’sexisting position in fast growing regions such as Asia-Pacific and Latin America.
Service lies at the heart of this proposed transaction. With a combined network and enhancedIT platforms, customers will have access to deeper product capabilities and broader reach throughthe expanded geographies served, giving them more choice and flexibility to support the growth andglobalization of their businesses. The combination also will offer employees greater opportunitiesto be part of a global, growing and respected business.
“With this combination, both UPS and TNT Express will significantly enhance their ability toserve our combined customers’ complex global logistics needs. The additional capabilities andbroadened 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 andshareowners,” said Scott Davis, UPS Chairman and CEO.
“This combination will significantly enhance the capabilities of two strong companies. I amconvinced that together we will be the supplier and employer of choice in the express deliveryindustry. Our customers will greatly benefit from our enhanced combined service offerings. To my77,000 colleagues I say that the combination will create unique opportunities for development andgrowth in which we can participate,” said Marie-Christine Lombard, TNT Express CEO.
After careful consideration of all of TNT Express’ strategic alternatives, the Executive andSupervisory Boards of TNT Express believe this transaction is in the best interests of the companyand its stakeholders and intend to support and unanimously recommend the Offer for acceptance toTNT Express’ shareholders. Goldman Sachs International has issued a fairness opinion to theSupervisory and Executive Boards of TNT Express and Lazard B.V. has issued a fairness opinion tothe Supervisory Board, in each case to the effect that, as of today, the offer price is fair to theTNT Express shareholders from a financial point of view.
PostNL N.V., holder of approximately 29.8 per cent of the outstanding shares of TNT Express,has committed itself to tender its shares under the offer if and when made, UPS and TNT stated.
UPS also said that it recognizes that TNT Express’ employees will play a pivotal role in thesuccess of the combined entity and they will be treated accordingly. All employee rights,covenants, and benefits under current ownership will be respected. As a result of the proposedtransaction, the employees of the combined group will have broader career opportunities based onfuture growth expectations.
UPS stressed it has a long-standing history of developing people through its promotion fromwithin philosophy, giving employees the opportunity to hold positions at the highest levels of thecompany. Additionally, UPS and TNT Express share a common business culture and believe that acombination of the businesses will prove attractive to employees. Throughout integration, theselection and appointment of staff for any function within the newly combined entity, will besubject to applicable laws, and be based on the “best person for the job” principle. In case ofpotential consequences for employees of the combination, the principle of fairness will be appliedas to the impact of redundancies on TNT Express and UPS staff.
UPS spent considerable time evaluating potential integration opportunities as it evaluatedthis transaction. In the coming months, UPS and TNT Express will work together through theestablishment of an Integration Committee to develop plans to combine both companies’ strongnetworks and customer relationships while maintaining the same level of quality and serviceassociated with both companies. UPS is committed to maintaining an ongoing dialogue with, and toclosely involve, employee representatives in line with legal requirements and UPS and TNT Express’leading employment practices.
UPS recognizes the expertise of TNT Express’ leading road freight network in Europe. It alsoappreciates the leading role that the road freight management will occupy in the combined group.UPS undertakes to create a meaningful center of excellence for marketing, sales, and operations inThe Netherlands. UPS recognizes the significant value of TNT Express’ operations, assets and peoplein Liège and will seek to continue the future utilization of these operations, assets and peoplewithin the combined group.
TNT Nederland B.V. will maintain the mitigated structure regime. After successful completionof the Offer, the Supervisory Board of TNT Express will be composed of at least three membersidentified by UPS and two members of the current Supervisory Board of TNT Express, namely ShemayaLevy and Margot Scheltema. These two members will function as independent Supervisory Directorswithin the meaning of the Dutch Corporate Governance Code and shall continue to serve on theSupervisory Board until the third anniversary of the settlement date.
UPS and TNT Express said they have done extensive preparatory work on the requiredcompetition filings. UPS is confident that it will secure all relevant competition approvals.
On the issue of a possible competing offer, UPS and TNT Express said they may terminate themerger protocol in the event that a bona fide third-party offeror makes an offer which is bindingupon such party, exceeds the Offer Price by at least 8 per cent and is considered by the Executiveand Supervisory board of TNT Express to be substantially more beneficial to TNT Express. In theevent of a competing offer, UPS will be given the opportunity to match such offer, in which casethe merger protocol may not be terminated by TNT Express. TNT Express has entered into customaryundertakings not to solicit offers from third parties.
It is UPS’s intention to submit a request for approval of its offer document to the AFMwithin 8 weeks from today and to publish the offer memorandum during Q2 2012 in accordance with theapplicable statutory timetable. TNT Express will hold an informative Extraordinary General Meeting(EGM) at least 6 business days before closing of the offer period in accordance with Section 18Paragraph 1 of the Decree.
PostNL announced separately that it had irrevocably undertaken to tender all TNT shares heldby it under the offer subject to customary undertakings and conditions (the “IrrevocableUndertaking”). The Irrevocable Undertaking terminates, inter alia, upon termination of the MergerProtocol between UPS and TNT Express. PostNL may furthermore terminate the Irrevocable Undertakingin the event that the executive and supervisory boards of TNT Express revoke their recommendationof the Offer upon a bona fide third-party offer or making an offer which exceeds the offer price byat least 8 per cent that is considered by the executive and supervisory boards of TNT Express to besubstantially more beneficial to TNT Express and that is not matched by UPS.
The Dutch postal operator will receive approximately €1,540 million in cash for its TNTshares. PostNL said it will put an amount of €700 million of the proceeds of the sale of all itsTNT Shares in an escrow account which will be used for the purpose of the reduction of its debt, inline with PostNL’s financial policy.
