FedEx will be left in a “sub-optimal” position in Europe after turning down the opportunity tobid for TNT and allowing arch-rival UPS to acquire the Dutch company instead, according to one
European markets analyst. The claim came as international unions called for talks with UPS todiscuss the jobs impact of the TNT deal.Andre Mulder, equity research analyst at Kepler Capital Markets, told CEP-Research today that hewas “surprised and disappointed” by FedEx’s decision not to make a move for TNT, with FedExpresident and CEO Fred Smith yesterday all-but ruling out the possibility of a counter-offer.
At FedEx’s third-quarter results conference call yesterday, Smith insisted: “FedEx has aprofitable, multi-billion operation in Europe that is growing strongly. I am extremely pleased withour operation there, and we are very confident about our plans to continue expanding, primarilythrough organic growth. I believe these plans will continue to improve our competitiveness inEurope and further contribute to our international growth.”
Mulder commented: “The acquisition of TNT would only make a fairly small dent in the finances ofFedEx, whereas now they are left with a number of sub-optimal solutions for Europe, scratchingaround and assembling a number of smaller companies. That is one of the reasons why we were sosurprised that FedEx did not come in with an offer – because TNT is the only company available thathas a broad European coverage.”
Since TNT listed on the Amsterdam Stock Exchange 14 years ago in its former combination of Dutchpostal operator and international express business, there has been plenty of opportunity to look indetail at its potential, said Mulder, and most analysts assumed that FedEx would eventually buyTNT, because TNT’s strong European coverage complemented FedEx’s relatively weak market share inEurope, creating relatively little overlap.
“That would give FedEx a good negotiating weapon, because it could have offered afull-employment guarantee to TNT staff,” said Mulder. In contrast, UPS and TNT have considerableoverlaps in the UK, Germany, France, The Netherlands, and several other countries in Europe,creating possible competition issues with the European Commission, as well as the need to lay offthousands of staff. TNT and UPS have so far given no job guarantees to TNT staff in Europe,although TNT has denied reports of up to 20,000 job losses.
The International Transport Workers’ Federation (ITF) and UNI Global Union this week invited UPSto join them for talks on the implications of the takeover, “particularly with respect to the jobsand conditions of current TNT employees”. The ITF and UNI said they “hope to ensure that TNT andUPS workers are not pitted against each during the transition, and that UPS will respect theorganising and bargaining rights of workers involved in the merger, and elsewhere in their network”. Unions in the Netherlands and Belgium, including UNI and ITF affiliates, have already written toTNT expressing their concerns about the purchase.
UNI General Secretary Philip Jennings said: “This purchase by UPS will create the world’slargest express mail and logistics company. The workers in this global giant deserve to beguaranteed workers’ rights.” ITF general secretary David Cockroft added: “UNI and the ITF will askthat the new, larger UPS sets an example to the logistics industry by negotiating with its unionsaround the world and entering a formal dialogue. We were pleased with the recent union recognitionand the signing of a collective bargaining agreement in Turkey and hope that this positive examplewill show the way forward.”
Mulder estimates that there could be 20,000-25,000 job losses as a result of the merger, aprocess that TNT and UPS say will be phased over three to four years. Mulder says that assuming anatural staff attrition rate of 4% a year, and assuming 4% annual business growth, it would bepossible to eliminate 20,000-25,000 positions over four years without compulsory redundancies. “ButI think they will want to do it at a faster pace than that, so I think it will involve compulsoryjob losses,” he added.
Speaking at Deutsche Post DHL’s annual results press conference two weeks ago, DHL Express CEOKen Allen commented that the acquisition of TNT by UPS would leave FedEx in a relatively weakposition in Europe. He said: “They have bits of partnerships at the moment. Maybe they could lookat a GLS or a DPD acquisition, but I don’t think that is likely either. But if they have to buildout their European situation, that is going to take a number of years in an environment wherebusiness is tough.”
