UPS today announced the withdrawal of its offer for TNT Express after the European Commissionofficially confirmed it was prohibiting the €5.2 billion deal.
As expected, the European Commission announced that it was blocking the takeover of TNT by UPSdue to the impact on competition in the European express market. Competition commissioner JoaquínAlmunia said the proposed acquisition would have restricted competition in 15 EU member states andUPS’ proposed remedies were inadequate to resolve Brussels’ concerns.
On January 14, UPS had already announced that it expected the European Commission to prohibitthe deal and said it would withdraw its offer once Brussels had made a formal decision.
In response to today’s Commission announcement, UPS issued a statement saying that as a resultof the prohibition by the EC, the offer condition relating to EU Competition Clearance will not befulfilled and the acquisition of TNT Express by UPS will not be completed. Given this outcome, thetwo companies entered a separate agreement to terminate the Merger Protocol. UPS will pay TNT anagreed €200 million termination fee.
Commenting on the EC’s decision, UPS said it had proposed “significant and tangible” remediesdesigned to address the EC’s concerns with the transaction concerning the competitive landscape inEurope. UPS reiterated that it believed that the combined company would have been “transformative”for the logistics industry, bringing meaningful benefits to consumers and customers around theworld, while supporting much needed growth in Europe in particular.
Looking ahead, UPS said it was “disappointed” in the EC’s decision but the company’s focus wason “the continued execution of its growth strategy”. Analysts and observers expect companyexecutives to comment on the failed TNT deal tomorrow (January 31) when UPS releases its Q4 andfull year 2012 financial results.
TNT Express declined to comment on the Brussels announcement. Spokesman Ernst Moeksis toldCEP-Research: “We have nothing to add to our press release issued on the 14th of January. We willinform the market on our stand alone strategy in due course.”
The Dutch company said on January 14 that it regretted the failure of the merger which itbelieved was “feasible and beneficial for all stakeholders”. TNT management would focus onreassuring customers, ensuring employee commitment and strengthening the strategy, includingfurther steps to improve profitability. TNT is due to announce its Q4, 2012 and full-year resultson February 18.
