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£4.3bn deal would create world’s biggest parcel delivery company

UPS has agreed a takeover of Dutch firm TNT. Picture: AP

UPS has agreed a takeover of Dutch firm TNT. Picture: AP

United Parcel Service (UPS) has agreed to pay €5.2 billion (£4.3bn) for Dutch peer TNT Express in a deal that would make the world’s largest package delivery company the market leader in Europe.

UPS will also get access to TNT’s stronger networks in the fast-growing Asian and Latin American markets, bringing the US group’s global sales up to almost £40bn.

However, the deal has raised concerns that smaller companies will find it harder to compete. Germany’s Deutsche Post DHL, the closest rival in Europe, said the European Commission should examine the proposed takeover thoroughly.

TNT, which employs some 10,000 staff in the UK and Ireland, yesterday said its executive and supervisory boards had unanimously supported UPS’s offer of €9.50 per share, a premium of nearly 54 per cent, and up from an initial €9 per share last month.

Marie-Christine Lombard, head of TNT Express, said: “It’s a difficult day and a great day. Difficult because TNT is a proud company and it is difficult to agree to be acquired. It’s a great day because the combination of the two companies will be enhanced and really deliver the global leader.”

TNT’s biggest shareholder PostNL, which owns 29.8 per cent of the firm, also said it backed the offer, which UPS will finance through a combination of cash and new debt.

The offer ends years of speculation about the future of the Dutch delivery company, which was split from the Dutch mail company PostNL and listed last year. With falling profits and a dreary outlook for 2012, TNT’s management had come under intense pressure from activist shareholders.

UPS said it was confident that competition officials would clear the offer without going into a prolonged investigation. But analysts said disposals might be needed to ensure the deal received the green light.

A spokesman for Deutsche Post DHL said the proposed acquisition would further strengthen the power of a significant player in a market with limited participants.

“The European logistics market is very fragmented and diverse, it’s not a single market”, noted a spokesperson for UPS, adding it was too early to comment on potential disposals.

UPS said the deal would accelerate its global growth strategy by increasing foreign revenue from 26 per cent to 36 per cent of the group total.

The acquisition will bring annual cost savings of about €400 million to €550m per year in four years, the firm added. It will first spend a pre-tax €1.3bn on “implementation costs” to achieve those synergies.

About two-thirds of TNT’s revenue is from European customers, but it also has been steadily growing in China and India, as well as Brazil, where it has struggled to integrate its acquisitions.

UPS recently bought Brussels-based Kiala in a bid to boost European e-commerce capabilities. Other purchases on the continent include the 2005 acquisition of parcel carrier Lynx Express in the UK and messenger service Stolica in Poland.

If a third party makes a binding counter offer exceeding the UPS bid for TNT by 8 per cent, either company can terminate the transaction, the firms said in a statement.

That would leave the door open for another rival, such as FedEX, to bid, but analysts have said that is unlikely.

TNT has a European air network with a fleet of 50 aircraft connecting 65 destinations. It also runs a road freight operation that connects 38 European countries.

 

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