The European Commission wants UPS to make “substantial” concessions to secure regulatoryapproval for its proposed $5.16 billion acquisition of TNT Express.
EU Competition Commissioner Joaquín Almunia said on Friday that the UPS-TNT merger and afinancially smaller merger, in which telecoms operator Hutchison would buy the Austrian subsidiaryof France Telecom for €1.3 billion, were two “interesting” competition cases that the Brusselsauthority is examining at present.
“Our preliminary view is that serious competition concerns would arise in both cases, andsubstantial remedies are needed,” he said at a conference in Cernobbio, Italy.
Almunia did not give any details about what kind of remedies UPS would need to offer in order tosecure approval for the takeover. UPS and TNT executives refused to disclose any information aboutthe EU’s objections at their recent quarterly results press and analyst conferences.
After conducting an extremely detailed in-depth investigation into the takeover in recentmonths, the Commission has sent both UPS and TNT a confidential statement of objections to thedeal, and is due to receive their responses very shortly. It will then take a decision by January15.
Analysts and industry experts have speculated that significant assets or business activitieswill need to be disposed of in major EU markets where a combined UPS-TNT would become a majorplayer alongside or ahead of DHL Express and well ahead of FedEx, which is relatively small inEurope, and thus significantly reduce overall competition in the market.
The Financial Times reported on Friday that the Commission has issued “strong and deep-rooted”objections to UPS’s proposed takeover of TNT, “leaving the US delivery group with an uphillchallenge to save the deal from being blocked”. According to people familiar with the EU document,this concludes that the merger “will undermine competition in express small parcel delivery inalmost every European national market, which would likely raise prices and restrict choice forcustomers”.
The FT warned it could be difficult for UPS and TNT Express to find remedies that would ensureenough competition remained in the relevant express market after their merger.
Last week UPS formally extended its €9.50 takeover offer for all TNT Express shares fromNovember 9, 2012, until February 28, 2013, to create enough time to gain regulatory approval forthe deal. Both companies have repeatedly stressed they are confident that the transaction will beapproved early next year.
