FedEx set to buy rival firm TNT for €4.4bn
European regulators blocked a 2013 takeover of TNT by UPS due to concerns it would stifle competition, but analysts and executives said yesterday that 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% market share in Europe, followed by UPS with 16% , TNT with 12% and FedEx at 5% — meaning the deal would catapult FedEx to second place.
FedEx will offer €8 in cash per ordinary TNT share — a 33% 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 per share offer was around $12.50 in dollar terms. Compare that with FedEx’s €8 a share offer, worth $8.75 today. TNT stock rose more than 30% yesterday 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, also said it would tender its 14.7% stake to FedEx.
UPS is fighting the decision by European regulators to block its 2013 bid for TNT, but said it will not rebid for TNT regardless of the outcome. In a note to clients, ABN Amro wrote that UPS had 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.
TNT, whose European market share has slumped by as much as 5% 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% European market share ceiling UPS ran into, he said.
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