UPS’ takeover of TNT Express for €5.16 billion will be delayed for several months due to adeeper investigation by the European Commission into the deal’s impact on competition and
customers, creating “huge opportunities” for rivals such as DHL Express.The deal, which would consolidate the worldwide express sector around three global players, isnow expected to be completed in the fourth quarter of 2012 instead of during the third quarter.
UPS and TNT Express announced late on Friday that the European Commission’s review of theproposed acquisition “is expected to move to a Phase II review, as there are certain areas thatrequire more time to analyse”. As a result, UPS said it expects to extend its current €9.50 pershare offer to TNT shareholders beyond the current August 31, 2012 deadline.
The Commission had been expected to announce by Friday July 20 whether it would approve thetransaction after a short Phase I review – as the two companies had previously predicted – orconduct a deeper Phase II investigation which could take up to 25 weeks to complete. Thetransaction was officially notified to Brussels in mid-June.
UPS and TNT Express stressed that they “welcome the opportunity to further engage with theCommission’s competition services. UPS and TNT Express remain convinced the merger will benefitcustomers and other stakeholders and look forward to successful completion of the regulatoryprocess.”
Under the terms of the €5.16 billion offer, UPS will acquire TNT Express to create a serviceleader in the logistics industry and an enhanced, integrated global network. The larger companywould “help facilitate the flow of trade, making customers more competitive not just in U.S. andEuropean markets, but also in markets across Asia and Latin America – helping to stimulate muchneeded economic growth”, the two companies said.
The move follows a recent call by two MEPs for a deeper probe into the deal due to the potentialimpact on competition, the market, customers and jobs. Andreas Schwab, a German Christian Democrat,and Jean-Paul Gauzès, a French Conservative, told the European Commission Vice President JoaquínAlmunia, who is in charge of competition, that they feared major job cuts at TNT’s Liege air hub,warned that “critical market share thresholds” might be exceeded and claimed the acquisition mightimpact on price competition by eliminating “a low-price competitor in the European express market”.
Deutsche Post DHL CEO Frank Appel, speaking in Shanghai ahead of Friday’s announcement, said: “Ithink the European Commission should look carefully at what is happening. There are three and ahalf players, one will disappear and there will be no new entry. The Commission has to decidewhether there is an impact.” Asked about the impact of the acquisition on DHL, Appel responded: “Itcreates a huge opportunity. Two of our competitors will be busy with integration.”
The delay was greeted negatively on the financial markets today (Monday). TNT’s share pricedropped sharply in early trading in Amsterdam but then recovered to -1.37% by late afternoon, whileUPS’ share was down 0.57% mid-morning on the New York Stock Exchange. PostNL, which is selling its29% stake in TNT Express to UPS for about €1.54 billion, was down 2.55% by late afternoon. Incontrast, the Deutsche Post DHL stock was up 1.36% by late afternoon.
