FedEx has reaffirmed that its planned €4.4 billion acquisition of TNT is still ‘on track’ despite the European Commission’s decision to hold an in-depth investigation into the deal over competition concerns.
The Commission announced on Friday (July 31) that it would investigate concerns that a combined FedEx-TNT, which would compete with DHL and UPS in future, could lead to reduced competition and higher prices in some European international express markets. This Phase II review is scheduled to last until mid-December.
In response, FedEx described the review as “the next step in the process” before the Commission makes a decision. “Based on the required steps and subject to the necessary approvals, closing of the offer is anticipated in the first half of 2016,” the company reiterated.
David Binks, President of FedEx Express Europe, said: “We will continue to work together with TNT Express to meet the European Commission’s need for additional due diligence and are confident that the combination of both companies will increase competition and create benefits for customers. We continue to make progress on all of the necessary regulatory steps around the world that would allow us to complete this transaction in the first half of 2016 and unite two great teams that share a passion for customer service.”
TNT said that it had “noted” the Commission’s decision to initiate a Phase II review which it described as “part of the European Commission's customary investigation process” and emphasised that it “looks forward to the success of the intended acquisition”. The company will continue to cooperate with FedEx and the European Commission with a view to a positive outcome.
“Once approved, the joining of FedEx and TNT will create benefits for all stakeholders. It is intended to provide customers access to a considerably enhanced, integrated global network, combining TNT's strong European capabilities and FedEx's strength in other regions globally, including North America and Asia. TNT’s customers would also benefit from access to the FedEx portfolio of solutions, including global air express, freight forwarding, contract logistics and surface transportation capabilities,” the Dutch company commented.
Announcing the review, European Competition commissioner Margrethe Vestager said: “Many businesses, and in particular e-commerce, rely heavily on affordable and reliable small package delivery services, and many consumers depend on these services to ensure rapid and safe delivery of goods they have bought. The Commission must therefore make sure that FedEx’s takeover of TNT would not impede effective competition and would not lead to higher prices for consumers.”
The Commission said its initial investigation had shown that the reduction from four to three integrators for express services within or outside the European Economic Area (EEA) would “significantly reduce” the competitive constraint on the merged entity. This would “lead to a concentrated market in several Member States for international express delivery services to a destination within or outside the EEA” while for international 'deferred' services outside the EEA the merged company would also have “very high market shares for services to some destinations leading to potential competition concerns”.
Under the agreed deal announced on April 7, FedEx would pay €8 per share for all TNT shares, valuing the Dutch company at around €4.4 billion. FedEx started the formal process to obtain merger control approval from the European Commission on June 26, 2015 by submitting the required filing to obtain regulatory clearance in connection with its intended offer to acquire TNT Express.
FedEx also submitted a request for review and approval of its Offer Document with the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële Markten, AFM) on June 26, 2015 as required under Dutch law. In addition, the takeover is being reviewed by other antitrust agencies, including the Ministry of Commerce (MOFCOM) in China and Conselho Administrativo de Defesa Econômica (CADE) in Brazil. Both firms have large businesses in Brazil.
FedEx’s formal offer had been expected during the third quarter with TNT shareholders scheduled to vote on the offer in the second half of this year, followed by completion of the transaction in the first half of 2016.
