UPS/TNT Express deal falls apart in the face of EC opposition

While regulators were worried about the European market, deal would have also shifted the emerging-markets competitive scene

After months of protracted negotiations between UPS (Atlanta) and the European Commission, UPS withdrew its €5.2-billion ($6.4 billion) offer for TNT Express, which is primarily an express-parcel delivery service operating globally. UPS actually pre-empted the EC after the latter told UPS that it was “working on a decision to prohibit” the transaction. UPS will now pay a €200-million termination fee to TNT, whose shares were already dropping prior to the announcement; according to press reports hedge funds who had bet on the merger going through will be taking a bath as well.

“The combined company would have been transformative for the logistics industry, bringing meaningful benefits to consumers and customers around the world, while supporting growth in Europe in particular,” said Scott Davis, UPS CEO, who was “extremely disappointed” that the transaction didn’t go through. “Looking ahead, our company focus will be on the continued execution of our growth strategy. While we viewed the acquisition as a compelling growth platform, our financial strength allows UPS to capture future opportunities.”

TNT has become something of a stepchild in the European market, dominated by the DHL unit of Deutsche Post AG, FedEx and UPS; it was spun out of the PostNL, the Dutch postal company, a couple years ago under shareholder pressure. According to press reports, PostNL will seek to sell its stake, and TNT will attempt to go forward as an independent company.

Although life sciences products are a small portion of overall global freight, they are important to all these logistics integrators because of the dependence on air freight to move time- and temperature-sensitive pharmaceuticals. TNT has an enviable position in Asia and South America that would have benefitted UPS, which is striving to grow its non-US business.