An overwhelming 90% of express customers in Europe support FedEx’s planned €4.4 billion takeover of TNT in order to maintain three major players and ensure continued strong competition in the sector, according to a survey by the European Shippers Council (ESC).
The ESC, a federation of national organisations that represent about 100,000 manufacturers, retailers, wholesalers and other transportation users, surveyed express customers throughout Europe via the national organisations in response to the European Commission’s call for feedback on the proposed deal by July 14.
In contrast to shippers’ vocal opposition to the UPS – TNT deal in 2012/13, which was ultimately blocked by Brussels for competition reasons, this time there was clear support for the FedEx – TNT takeover proposal, and 90% of ESC members welcomed the deal.
Explaining this very different response, the ESC said that the reasons were “almost unanimous”. Express customers/users never saw FedEx as an option for the Intra-European market. “FedEx is in the eyes of many European shippers a great way in moving cargo from Europe to and from the US, but not for moving packages from EU member state A to EU member state B. This Intra-European market is still dominated by TNT, UPS and DHL,” the association pointed out.
“Another reason to support this merger is the financial situation of TNT. Without a takeover and a financial impulse, TNT will probably not survive for a very long time in the express market,” the ESC commented.
A merger of FedEx and TNT would mean that the number of pan-European express carriers will remain the same in future, competition will probably grow due to the strong position of FedEx and better logistic services will be provided to the European industry, it concluded.
Joost van Doesburg, the ESC’s air freight policy manager, told CEP-Research: “I was quite surprised with the outcome of our survey this time. When UPS and TNT planned to merge, the big shippers were really against it. They feared that the EU market would become similar to the US where there are only two big players. For example, rates in the US are much higher than in Europe, and they feared that the same could happen in Europe with UPS and DHL.”
In response, the ESC lobbied the European Commission to block the UPS-TNT deal, and shippers welcomed Brussels’ decision that kept three major players in the international express market, he explained.
Since then, however, shippers have become worried about TNT’s prospects, he continued. “Everyone knew that TNT was not doing very well in comparison with the other big players.”
Commenting on the results of the survey on the FedEx-TNT deal, van Doesburg said: “European shippers do not see FedEx as a strong player for intra-Europe shipments. 90% of them were positive about the merger. The majority really see this as a perfect match.”
Looking ahead, he added: “With a merger of TNT and FedEx we maintain a continuation of three big players. I think competition will increase because as part of FedEx TNT will be a much better financial position. So express customers will get better rates and better service in future.”
The European Shippers Council does not expect the European Commission to block FedEx’s move for TNT. “The Commission does not seem to have many questions for shippers. With UPS they had lots of questions. That’s not my impression now. It seems they have fewer concerns and I don’t foresee any big problems,” van Doesburg concluded.
FedEx, which filed necessary documents to Brussels and the Dutch financial markets authority in June, is expected to formally make the takeover offer for TNT by the end of July.
Under the agreed deal announced on April 7, FedEx will pay €8 per share for all TNT shares, valuing the Dutch company at around €4.4 billion. TNT’s board has recommended that shareholders accept the offer, and the largest shareholder, PostNL, has committed itself to sell its remaining 14.7% stake in TNT to FedEx.
The European Commission’s Competition directorate has released a provisional date of August 3 by which it expects to make a decision on FedEx’s offer for TNT. This date can be extended if necessary.
According to observers, the main issue for Brussels will be the sale of TNT Airways to an EU-based owner in order for the airline to remain a European carrier. The business overlap between TNT and FedEx in Europe is not seen as significant enough to require major disposals on either side.
FedEx stated last month: “Based on the required steps and subject to the necessary approvals, closing of the offer is anticipated in the first half of calendar year 2016.”
