UPS, TNT Express Said to Near Agreement After Initial Rejection
By Matthew Campbell, Zachary Mider and Natalie Doss - Mar 9, 2012 5:05 PM GMT+0100
United Parcel Service Inc. (UPS) is nearing an agreement to buy TNT Express NV (TNTE),Europe’s second- largest package-delivery company, after an initial 4.9 billion euro ($6.5 billion) offer was rejected, people familiar with the matter said.
The two sides are now close to a deal on price following UPS’s bid of 9 euros a share last month, and on conditions that may lead to job cuts and require divestments to win antitrust approval, said the people, who declined to be identified because the process is private. The talks are focused on concessions UPS will offer to preserve TNT jobs in Europe, and bigger measures to keep jobs will probably impact the price UPS is willing to pay, one of the people said.
United Parcel Service Inc. cargo at Mather Airport in Sacramento. Photographer: Ken James/Bloomberg
Buying the Dutch company would bolster European operations for UPS, the world’s biggest package-delivery service, giving it an edge in its rivalry with FedEx Corp. (FDX) With expansion already under way in Germany, UPS might cut overlap there and elsewhere in Europe to satisfy competition regulators, saidKevin Sterling, a BB&T Capital Markets analyst in Richmond, Virginia. TNT employed about 77,478 people at the end of December.
“It would have to be probably on a case-by-case basis by each country,” Sterling said. “From the UPS perspective, in order to extract some savings, they’ll definitely consolidate some offices.”
Sterling said he doesn’t expect the Atlanta-based company to pay substantially more than its initial 9 euro-a-share offer. An announcement may come as soon as next week, the people said.
Smallest of Four
As the smallest of the four major global delivery services companies, Amsterdam-based TNT has been a longtime subject of merger speculation. UPS has a 7.7 percent share of the European market, while FedEx has 3.3 percent. Both of them lag TNT and Deutsche Post AG (DPW)’s DHL unit, which have 9.6 percent and 17.6 percent in the region respectively, according to figures from research firm Transport Intelligence.
TNT shares advanced as much as 21 cents, or 2.3 percent, to 9.54 euros in Amsterdam today, and were up 1.2 percent as of 4:26 p.m. UPS advanced 0.5 percent to $77.10 in New York. Spokesmen for both companies declined to comment on their negotiations. A spokesman for TNT’s works council declined to comment on a UPS bid.
TNT’s unions are opposed to “forced” job cuts, according to a March 6 letter sent by four of the company’s main unions to TNT Chief Executive Officer Marie-Christine Lombard and Antony Burgmans, supervisory board chairman.
March 16 Deadline
Under Dutch law, UPS must clarify its intentions to the market by March 16, four weeks after the first announcement of its acquisition proposal. TNT disclosed UPS’s interest in a statement on Feb. 17, calling the first bid “highly conditional” and saying the two companies remained in talks.
While discussions are continuing, the companies may still fail to reach an agreement, the people said.
Acquiring TNT would give UPS a 17.3 percent share of the market for European express shipments before any divestments, almost on par with DHL. The purchase would probably require sales of road operations and depots in the Benelux countries and the U.K. to satisfy antitrust regulators, ABN Amro analyst Maarten Bakker said last month.
Founded in Australia as Thomas Nationwide Transport in 1946, TNT was spun off in May from the Dutch postal operator, now known as PostNL, which retains 29.9 percent of the company, according to Bloomberg data.
To contact the reporters on this story: Matthew Campbell in London atmcampbell39@bloomberg.net; Natalie Doss in New York at ndoss@bloomberg.net
To contact the editor responsible for this story: Jacqueline Simmons at jackiem@bloomberg.net
02/17/2012 | 11:43am
UPS, TNT in talks after 4.9 billion euro bid
United Parcel Service Inc. is in talks with TNT Express after its Dutch rival rejected a 4.9 billion-euro ($6.45 billion) cash bid, the companies said on Friday.
UPS made an offer of nine euros per share for all of TNT's issued capital, a premium of 42 percent over TNT's closing price on Friday of 6.343 euros.
"UPS confirms that, on 11 February, 2012, following discussions with TNT, it made a revised, increased and comprehensive proposal to acquire the entire issued share capital of TNT for nine euros per share in cash," the U.S. firm said in a statement.
"We are open to advancing the talks, and we continue to be in discussions," Ernst Moeksis, spokesman for TNT Express, told Reuters.
UPS's bid emerged as activist shareholders in TNT stepped up calls for the company to shake up its board and increase shareholder value, which could include a takeover.
Analysts have put a price tag on TNT Express of about 5 billion euros.
The group has suffered declining revenues across all of its markets as the global economic slowdown led more customers to shun air transport in favor of cheaper shipping.
Listed in May after it split from delivery firm PostNL, TNT Express shares have fallen from a high of 10.20 euros on May 10 to a low of 4.46 euros on October 6.
"I find it difficult to believe that there's going to be a significant bidding war for these assets," said Art Hatfield, managing director in equity research at Morgan Keegan & Co., based in Memphis. "It's a good offer."
Andre Mulder, analyst at Kepler Capital Markets, said he did not rule out a counter-offer from FedEx Corp.
"We had expected Fedex to move as its European domestic share is only 2 percent," he said in a research note, adding that FedEx "has zero debt and could easily cough up this amount if it could find the banks to lend it the money. As TNT would be highly complementary, cost savings would be much smaller at some 100 million euros."
Mulder said he did not see major objections from the competition authorities except perhaps in the United Kingdom.
"TNT already is the domestic market leader in Europe with an 18 percent share, with Deutsche Post second at 15 percent. Adding the 10 percent for UPS would take it to just below 30 percent. Nearing a 33 percent danger level, we think that only in the U.K. the combination may have too high a market share, so this could be subject to some disposals."
PostNL, the largest shareholder in TNT Express with 29.9 percent, declined to comment on the UPS bid. It has already indicated that it would support a possible takeover.
PostNL has taken impairments of more than 700 million euros on its stake in recent months on its TNT stake.
Bowing to pressure from activist shareholders, TNT this month agreed to appoint several new members to its supervisory board, including two candidates proposed by American investor Jana Partners.
Jana Partners called for an overhaul of the TNT Express supervisory board in December, including replacing the chairman, to try to force the Amsterdam-listed logistics company to improve operational performance while at the same time explore a sale.
Jana, which together with Canada's Alberta Investment Management Corporation (AIMCO), has a combined stake in TNT Express of just over 5 percent, told Reuters earlier this year the current TNT management was destroying shareholder value and needed to be replaced.
($1 = 0.7597 euros)
(Additional reporting by Lynn Adler; Editing by Sara Webb and Jane Merriman)
"UPS confirms that, on 11 February, 2012, following discussions with TNT, it made a revised, increased and comprehensive proposal to acquire the entire issued share capital of TNT for nine euros per share in cash," the U.S. firm said in a statement.
"We are open to advancing the talks, and we continue to be in discussions," Ernst Moeksis, spokesman for TNT Express, told Reuters.
UPS's bid emerged as activist shareholders in TNT stepped up calls for the company to shake up its board and increase shareholder value, which could include a takeover.
Analysts have put a price tag on TNT Express of about 5 billion euros.
The group has suffered declining revenues across all of its markets as the global economic slowdown led more customers to shun air transport in favor of cheaper shipping.
Listed in May after it split from delivery firm PostNL, TNT Express shares have fallen from a high of 10.20 euros on May 10 to a low of 4.46 euros on October 6.
"I find it difficult to believe that there's going to be a significant bidding war for these assets," said Art Hatfield, managing director in equity research at Morgan Keegan & Co., based in Memphis. "It's a good offer."
Andre Mulder, analyst at Kepler Capital Markets, said he did not rule out a counter-offer from FedEx Corp.
"We had expected Fedex to move as its European domestic share is only 2 percent," he said in a research note, adding that FedEx "has zero debt and could easily cough up this amount if it could find the banks to lend it the money. As TNT would be highly complementary, cost savings would be much smaller at some 100 million euros."
Mulder said he did not see major objections from the competition authorities except perhaps in the United Kingdom.
"TNT already is the domestic market leader in Europe with an 18 percent share, with Deutsche Post second at 15 percent. Adding the 10 percent for UPS would take it to just below 30 percent. Nearing a 33 percent danger level, we think that only in the U.K. the combination may have too high a market share, so this could be subject to some disposals."
PostNL, the largest shareholder in TNT Express with 29.9 percent, declined to comment on the UPS bid. It has already indicated that it would support a possible takeover.
PostNL has taken impairments of more than 700 million euros on its stake in recent months on its TNT stake.
Bowing to pressure from activist shareholders, TNT this month agreed to appoint several new members to its supervisory board, including two candidates proposed by American investor Jana Partners.
Jana Partners called for an overhaul of the TNT Express supervisory board in December, including replacing the chairman, to try to force the Amsterdam-listed logistics company to improve operational performance while at the same time explore a sale.
Jana, which together with Canada's Alberta Investment Management Corporation (AIMCO), has a combined stake in TNT Express of just over 5 percent, told Reuters earlier this year the current TNT management was destroying shareholder value and needed to be replaced.
($1 = 0.7597 euros)
(Additional reporting by Lynn Adler; Editing by Sara Webb and Jane Merriman)
TNT EXPRESS : PREMIERS PAS EN BOURSE
Le spécialiste du transport de colis TNT Express fait aujourd'hui son entrée sur NYSE Euronext Amsterdam. La société opérera sous le code TNTE et sera rattachée à l'indice AEX Index. L'opération procède de la scission du groupe TNT en deux entités, validée par les actionnaires hier. Le règlement-livraison des nouvelles actions de la société interviendra le 31 mai 2011, qui sera également le premier jour d'achats et de ventes d'actions. La cotation en Bourse des actions PostNL, l'activité courrier de TNT, sera effectuée sous le code PNL.
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