FedEx Corp. on Tuesday announced its set to acquire the struggling Dutch parcel-delivery firm TNT Express NV for about $4.8 billion to expand in Europe. This deal is expected to ramp up the US parcel delivery group’s presence in Europe and raising the share value of the Dutch rival up 30%.
The combination of two big giants can create a strong third competitor in Europe to challenge DHL and UPS and expected no repeat of European regulatory issues that scuppered a previous takeover attempt by UPS in 2013. The chairman of TNT, Antony Burgmans said, “You have two strong companies and two weaker ones. Now there will be three big ones who will fight very hard for customers.”
FedEx and TNT said the cash deal had been approved by the Dutch company’s board and $8.5 per share offer price represents a premium of 33% over TNT’s share price on April 2. Share value of TNT rose 30% to $8 in response to the acquisition news.
FedEx chief executive David Bronczek said, “What the European Commission would like to see is greater competition – it’s better for the customer.” He is sure there would be hurdles in the pathway and he s also confident that it could be overcome. He expects the regulatory hurdle would take an year to complete and so will the deal to complete. If not completed in one year, a fine of $300 will be payable to TNT.
The deal also includes TNT to sell its airline operations. FedEx which has more than 660 aircrafts in its global fleet said that TNT’s European road network which connects more than 40 countries through 19 road hubs and over 550 delivery depots would be highly complementary. In the joint statement by the companies, they have reached a mutual agreement on cash offer by FedEx of $8 a share, giving TNT an equity value of $4.5 billion.
However, European union competition regulators blocked the proposed merger between UPS and TNT in 2013 saying the transaction would restrict competition in 15 EU countries. Concessions offered by UPS, including asset sales, were considered inadequate at that period of time. Analysts do not expect FedEx’s bid for TNT to be it with the same competition issues that dashed the UPS merger because they say FedEx is much smaller in Europe.