Dutch logistics co. TNT rejects UPS' $6.43B bid

[February 18, 2012]  NEW YORK (AP) -- United Parcel Service, the world's largest package delivery company, said Friday it is still in talks to acquire TNT Express even though the Dutch package delivery company rejected a $6.43 billion bid.

UPS said there is no guarantee that they will reach middle ground and make a deal. If UPS were to successfully buy TNT, it would significantly expand its business in Europe. The deal would be UPS' biggest ever. It also would be the biggest acquisition of European company by a U.S. corporation in six months -- since Hewlett-Packard Co. offered $10 billion to buy business software maker Autonomy Corp, according to Dealogic. Ongoing economic turmoil there has slowed acquisition activity, but it's also made battered companies more appealing.

UPS has said that while recession concerns reign in Europe, it's still seeing steady growth in its business there. It says growth may flatten in Europe this year amid debt concerns and continued economic struggles.

The TNT bid works out to euro9, or about $11.84, per share. That's based on TNT's 534.2 million outstanding shares. TNT's American depositary shares soared 56 percent to $12.57. UPS shares closed unchanged at $76.76, within pennies of a 12-month high.

TNT, Europe's second-largest express delivery company, said Friday that its supervisory and executive boards carefully considered the proposal from UPS Inc., which is based in Atlanta. Both companies confirmed they are still talking about other possible outcomes.

UPS has made a couple of smaller acquisitions to bolster its operations in Europe over the last several months. In December, it said it will buy Pieffe Group, an Italian company that specializes in shipping and storing pharmaceutical products. Last week it announced the purchase of a small Belgian e-commerce company, Kiala.

Standard & Poor's said it was placing its UPS ratings on negative CreditWatch, noting that the company has not provided any details on how it would finance the purchase. "If the transaction goes forward, UPS' credit metrics could deteriorate to a level that would no longer support our current ratings," which include a "AA-" corporate credit rating, the ratings agency said. That's three notches below S&P's top "AAA" investment-grade rating.

TNT, which is based in Amsterdam, has been seen as a takeover target of either UPS or smaller rival FedEx Corp. for some time. Deutsche Bank analyst Justin Yagerman said in a note to clients Friday that he doesn't expect FedEx will go after TNT, preferring instead to continue its plan of acquiring smaller companies in Europe. A FedEx spokesman said the company doesn't comment on corporate development matters.

Last month, TNT detailed plans to split its express and mail businesses and said its CEO will step down after that separation is complete. That's expected sometime next year.

The company's express operations are growing, but its mail business is struggling with lower volume and disputes over layoffs. In November, it reported third-quarter net profit fell by more than half to euro5 million, reflecting weak margins in its European businesses and losses at its operations in high-growth emerging markets.

Shareholders are set to vote on the separation in May.

TNT was split from Dutch mail company PostNL NV in May of last year.

[Associated Press; By SAMANTHA BOMKAMP]

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