|
 European regulators blocked a 2013 takeover of TNT by UPS due to
concerns it would stifle competition, but analysts and executives
said on Tuesday FedEx, with its strong air fleet, would complement
TNT's expansive European road network.
“This (acquisition) will dramatically lower our cost to serve
European markets,” FedEx communications vice president Patrick
Fitzgerald said.
ING analysts estimated that Deutsche Post's DHL currently has a 19
percent market share in Europe, followed by UPS with 16 percent, TNT
with 12 percent and FedEx at 5 percent - meaning the deal would
catapult FedEx to second place.
FedEx will offer 8 euros in cash per ordinary TNT share - a 33
percent premium on last week's close - in a deal that will give TNT
customers access to FedEx's global distribution platform.
Memphis, Tennessee-based FedEx is financing the deal purely from
debt - the latest company to take advantage of low interest rates.
The strong dollar may also have helped: UPS's 9.50 euros per share
offer was around $12.50 in dollar terms. Compare that with FedEx's 8
euro share offer, worth $8.75 today.
TNT stock leapt more than 30 percent on Tuesday towards FedEx's bid
price.
"FedEx has laid on the table an attractive offer price," said ABN
Amro analyst Maarten Bakker, who has a "hold" rating on TNT shares.
"With FedEx having always been the most logical predator of TNT
Express, we see the chances of a competing offer as slim."
The deal has been unanimously recommended by TNT's supervisory
board. TNT's largest shareholder, PostNL <PTNL.AS>, also said it
would tender its 14.7 percent stake to FedEx. PostNL shares rose 17
percent.
"SMART MOVE"
UPS is fighting the decision by European regulators to block its
2013 bid for TNT, but has said it will not rebid for TNT regardless
of the outcome. In a note to clients, ABN Amro wrote that UPS had
said it wanted to make sure no precedent was set by the EU decision.
The regulatory block was damaging for TNT, which had been counting
on adopting much of UPS's logistics backbone.
[to top of second column] |
TNT, whose European market share has slumped by as much as 5 percent
since the UPS deal fell apart, has cut costs, sold operations and
invested in its road network to hold on to customers in a weak
European market for business package deliveries.
"There is no regulatory risk whatsoever," said Kepler Cheuvreux
analyst Andre Mulder of the proposed deal, calling FedEx's offer
fair in view of TNT's weaker market position.
A rival bid from Deutsche Post was unlikely because it would risk
hitting the 30 percent European market share ceiling UPS ran into,
he said.
"FedEx made a smart move and their rivals can do virtually nothing,"
he added.
FedEx's decision to bid followed a 17 percent drop in TNT shares
over the past year, versus a 21 percent rise in the benchmark Dutch
AEX index.
TNT warned in February it expected tough trading to continue in its
main western European markets.
It forecast an operating profit for 2015 but expects at least 250
million euros in further restructuring costs over the coming two
years.
($1 = 0.9156 euros)
(Additional reporting by Thomas Escritt in Amsterdam, Nick Carey in
Chicago and Rama Venkat Raman in Bangalore; Editing by Muralikumar
Anantharaman, Mark Potter and Susan Thomas)
[© 2015 Thomson Reuters. All rights
reserved.] Copyright 2015 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
