FedEx remains confident about getting European Commission approval for its planned €4.4 billion acquisition of TNT Express and is not working on having to make any disposals to secure approval, according to a senior executive.
The Commission announced on July 31 that it would conduct an in-depth ‘Phase II’ investigation into the proposed deal, citing concerns about competition in some European markets. This review is scheduled to last until mid-December.
David Binks, President of FedEx Express Europe, told The Wall Street Journal in an interview yesterday: “I don’t think it’s any surprise that the Commission is going to do the right level of due diligence to make sure that they are comfortable with the opinion they reach.”
He added: “We’re not working on remedy plans. We’re not anticipating that situation. We’re anticipating the deal will be approved.” ‘Remedies’ refer to concessions made by companies in order to secure approval for a takeover, and often include disposals of businesses in specific markets where regulators believe market dominance could result from the transaction.
During UPS’ drawn-out attempt to take over TNT in 2012/13 the Atlanta-based company was forced to consider selling off a large number of TNT businesses in European markets in order to convince Brussels that a merged UPS-TNT would not dominate those markets.
In contrast, analysts see the European footprints of TNT and FedEx as largely complementary, given TNT’s strengths in intra-European and domestic deliveries and FedEx’s focus on international express to and from Europe.
However, the European Commission said on July 31 that its initial investigation into the proposed takeover 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”.
In response to that announcement, both FedEx and TNT reiterated their commitment to the deal. FedEx stressed that the Phase II review was merely the next step in the clearance process and it continued to expect closing of the offer in the first half of 2016 “based on the required steps and subject to the necessary approvals”.
Binks said in a statement on July 31 that FedEx “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”.
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. The deal is also being reviewed by Dutch, Chinese and Brazilian regulatory authorities.
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.
