TNT is stepping up investments in its network and pressing ahead with its Outlook strategy as the planned €4.4 billion acquisition by FedEx progresses, top executives stressed today.
CEO Tex Gunning told journalists during the company’s Q2 results press call: “While we fully support the offer (from FedEx), as a management team and as a company we are completely focused on executing the strategy as planned.”
He emphasised that TNT is making “good progress” on implementing the comprehensive transformation strategy Outlook, which focuses on three pillars: profitable growth, operational excellence and ‘organising to win’.
In recent months the Dutch company has stepped up investments in its European network with new direct road connections from Spain to France, Italy, Switzerland and Austria, new flights to Tel Aviv and Malta, and put a healthcare hub into operation in the Netherlands. New facilities in the second half of this year include new hubs/depots in Madrid, Eindhoven, Swindon, Brisbane and Melbourne, while investment is continuing at the Liege hub to improve productivity and cope with rising volumes.
“After years of under-investment we are catching up,” Gunning emphasised. Spending would increase automation in hubs and depots, while new facilities would replace ‘outdated’ ones, such as in Australia, he explained.
Capex investments more than doubled in Q2 to €96 million, representing 5.5% of revenues, compared to €37 million one year earlier. Investments totalled €174 million in the first half of 2015 as a whole compared to €63 million in H1, 2014.
Gunning also highlighted progress with outsourcing of IT and back-office functions, along with the successful separation of international and domestic activities and strengthening of the management team.
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.
Gunning reiterated that on June 26 FedEx had supplied the offer filing to the European Commission for regulatory clearance and to the Dutch financial markets authority.
The 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, although this date can be extended if necessary. The European Shippers Council recently announced that customers overwhelmingly support the merger plan.
In response to CEP-Research questions, CFO Maarten de Vries said TNT expects FedEx to make the formal offer to its shareholders during the third quarter and confirmed that Liege-based TNT Airways has to be disposed of so that FedEx can take over TNT.
Under EU aviation rules, European airlines must be under Europe-based ownership. This would mean a solution for TNT Airways is required in the near future.
A TNT shareholders meeting to vote on the FedEx offer is planned for the second half of this year. “We expect closure in the first half of next year,” Gunning said.
Observers believe that FedEx and TNT want to secure all regulatory approvals for the deal before the offer is formally made to shareholders in order to simplify and speed up the whole process.
During UPS’ failed bid for TNT in 2012/13, the American company was forced to extend its offer several times while EU competition officials launched an in-depth investigation that ultimately led to the proposed takeover being blocked by Brussels.
