TNT shareholders today approved FedEx’s €4.4 billion takeover offer, leaving the European Commission as the remaining major hurdle for the mega-deal, but the Dutch company also issued a Q3 profit warning due to “volatile economic conditions” in key markets.
At an Extraordinary General Meeting at TNT Centre in Amsterdam, shareholders voted through a series of resolutions, conditional on regulatory approval for the deal, which backed FedEx’s offer for all TNT shares, delisting of TNT from the Amsterdam stock exchange once the takeover is completed and the subsequent integration of TNT into FedEx.
They also agreed the conditional appointment of FedEx representatives Dave Bronczek, Christine Richards and David Cunningham to the TNT supervisory board and David Binks and Mark Allen to TNT’s executive board as per the settlement date. Current TNT CEO Tex Gunning will step down and be replaced by Binks, FedEx Express Regional President Europe, but will serve on an ‘integration committee’ for six months. Allen, FedEx Express SVP Legal International, will join the board on the settlement date while TNT CFO Maarten De Vries will remain in his post for six months from that date.
At the EGM, TNT’s Executive Board and Supervisory Board restated their support and recommendation for FedEx’s offer “which is set to provide compelling benefits and opportunities to TNT’s customers, employees and shareholders”.
Following today’s vote, TNT shareholders have until October 30, 2015, to sell their shares to FedEx, unless the offer made on August 21 is extended. The offer is dependent on at least 80% of shares being sold to FedEx.
David Binks, Regional President Europe, FedEx Express, stated: “We appreciate that the shareholders of TNT Express approved the resolutions of TNT Express’ Extraordinary General Meeting. We believe the combination of these two great companies will provide significant value to the employees, customers and shareowners of both TNT Express and FedEx, and we continue to work constructively with the regulatory authorities around the world to obtain clearance of the acquisition.”
FedEx emphasised in a press release that it and TNT Express “are on track to obtain all necessary approvals and competition clearances”. However, it noted that some of the approvals and competition clearances in Europe, Brazil, China and other jurisdictions could be received after October 30, 2015, which would cause its offer to be extended.
The US company reiterated: “The combination presents a highly pro-competitive proposition for the provision of small package delivery services within and outside Europe. The networks of TNT Express and FedEx are largely complementary, given that FedEx’s strength is providing U.S. domestic and extra-EEA international services, while TNT Express’ focus is on providing intra-European services. The combination would allow the parties to sell a more competitive e-commerce offering in the market, which should benefit consumers and SMEs in Europe and beyond.”
The European Commission has so far said that it expects to make a decision on its Phase II investigation by January 13, 2016, while FedEx and TNT have repeatedly said they are confident of approval and closure of the deal in the first half of 2016.
The Wall Street Journal reported late last week that Brussels is currently considering whether to force FedEx and TNT to make concessions such as asset sales as part of approval for the deal, and could issue a ‘statement of objections’ within the next two weeks. Finding a buyer for any disposals could be tricky as there are just two other direct competitors in the international express business, DHL and UPS, it wrote.
Bloomberg reported that UPS is lobbying hard in Brussels against the FedEx-TNT deal, and noted that the Commission might be forced to take a hard line because of an ongoing UPS legal appeal against the 2013 decision to block its planned acquisition of TNT.
Meanwhile, earlier today TNT warned in a pre-EGM trading update that it expects Q3 adjusted operating income to be materially lower than in the same period of last year due to the impact of market-related factors as well as Outlook-related transition costs.
The company said that during the July – September third quarter of 2015 it made progress in implementing Outlook, its three to five-year turnaround and transformation strategy, continued to achieve underlying revenue growth and had higher customer satisfaction, fuelled by service improvements and new services.
“However, the economic volatility in Brazil, China and Australia weighed on TNT’s performance in these parts of the world. In its Domestics segment, TNT faced competitive pressures in Australia, compounded by the drop in commodity markets, and the ongoing costs of modernising the company’s Australian infrastructure. The Domestics segment’s performance was also affected by substantially lower margins in TNT’s French operations,” it stated.
TNT said it is on track to invest about €300 million in its transport and IT infrastructure in 2015, in line with guidance, while the main infrastructure investments will be completed by the end of 2016. “Investments in productivity enhancement and automation have not yet contributed to the bottom line, as it takes time for such investments to deliver cost benefits,” it pointed out.
The company reiterated that 2015 is “a challenging year of transition” and that it expects to achieve year on year improvements from 2016 onwards and to realise the full benefits of Outlook from 2018-2019. The Q3 results will be announced on 26 October 2015.
