UPS buys TNT to expand European parcel business

[TrueBlueTerrier]

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UPS, the world's largest package delivery company, has long looked at TNT as a way to help it expand in Europe

UPS, the world's largest parcel-delivery company, has agreed to buy TNT Express in a €5.16bn (£4.3bn) deal. The US firm has been seeking a bigger footprint across the Atlantic, especially in the UK, France and Germany, and the deal boosts its presence in emerging markets such as Brazil and China.

The transaction comes a month after TNT rejected a €4.9bn offer from its suitor, but market watchers have been expecting an acquisition amid pressure from activist investors on TNT's shareholder register.

"TNT Express fits into UPS's long-term network plan," said Scott Davis, UPS chief executive. "This broadens UPS's global footprint." Both UPS and its US rival FedEx had been widely tipped to try to acquire their Dutch competitor, with FedEx holding takeover talks in 2008. It is the biggest deal for UPS since it was founded as a bicycle messenger service in 1907 in Seattle, though it is now based in Atlanta.

TNT's 30,000 vehicles and 46 aircraft deliver nearly 1m packages per day, but the company's network is dwarfed by that of its acquirer. UPS drops off 15.8m parcels and documents daily with nearly 100,000 vans, tractors and motorbikes, as well as its fleet of 223 jets, making it a larger aircraft operator than easyJet .

UPS controls 7.7% of the European express delivery market, compared with 9.6% at TNT; the combined business lis evel-pegging with Deutsche Post's DHL, which has a 17.6% share. DHL immediately called on the European commission to scrutinise the deal closely.

TNT's boss, Marie-Christine Lombard, said: "The combination of the two companies ... will be enhanced and really deliver the global leader that will be unequalled." The brown and gold UPS logo will supplant the bright orange TNT facia seen on European streets and at airports in the long term, Davis confirmed. The combined business will generate revenues of €45bn per year and expects to achieve up to €550m in cost savings within four years.

Analysts at RBC Capital Markets, an investment bank, have described an "ambivalent" reaction among some UPS investors, amid concern that the expenditure will prevent it increasing its dividend. "Many US investors were worried about the ability of UPS to keep growing the dividend," said John Barnes, RBC analyst. UPS is financing the deal with an equal mix of cash and debt. The €9.50 per share offer represents a 54% premium on TNT's share price the day before takeover talks went public last month. TNT's largest shareholder, the Dutch postal company, PostNL, has backed the deal. PostNL also owns the Royal Mail's largest competitor, TNT Post UK, which is not involved in the UPS transaction.

Other market watchers said disposals might be needed in order to secure regulatory clearance from Brussels. "We expect some divestments will be needed for the competition clearances," said Robert Czerwensky, a DZ Bank analyst. Both companies said they had carried out "extensive preparatory work" on obtaining a green light from EU competition authorities.

Davis said it was "too early" to tell if European commission regulators would order sell-offs, but said he expected the deal to be approved. "We're quite confident that all the necessary approvals will be obtained," he said. Trade unions in the Netherlands and Belgium have expressed concerns over jobs cuts in TNT's 77,000-strong workforce, but Davis would not be drawn on the issue , saying it was "way too early" to talk about redundancies. Nonetheless, analysts at Kelper Capital Markets said the deal could affect 20,000 jobs.

[disheartened]

So does that give TNT the money to buy Royal Mail?

[Talell]

TNT don't want royal mail, simply because we have the USO.

No DSA company wants us because we have the USO.

USO costs money, both for collections and delivery, and even checking compliance.

Yet, the USO is what safeguards royal mails future as a company, because it costs too much versus revenue generated for anyone to get a network anywhere near ours.

Only people who will buy us is a private equity firm looking for a run down company to strip assets from for a quick buck.

More than likely, we'll end up on the stock market, since they won't want to mutualise us, well because it wouldn't work, since the workforce has no ambition anymore, they simply just want to come in, do their job and go home.