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UPS in cash deal to buy TNT Express for $6.8b
Published in The Saudi Gazette on 20 - 03 - 2012

United Parcel Service Inc. said Monday it will buy Netherlands-based TNT Express NV for $6.77 billion (€5.16 billion) in a cash deal that will create a company with annual sales of €60 billion.
Atlanta-based UPS is the world's largest delivery company, while TNT, headquartered in Hoofddorp, Netherlands, is the second-biggest express mail company in Europe behind Germany's DHL. The combination will have 475,000 employees worldwide and increase UPS's international sales to around 36 percent of its total from 26 percent at present.
"Why is TNT very attractive?" said UPS Chief Financial Officer Kurt Kuehn at a press conference in Amsterdam. Because it has "operations in areas where we're underserved. Brazil. Australia. The Middle East. The road and train network in Europe."
He said UPS hopes to further boost its international sales to 50 percent in the next five years.
The merger is not expected to face serious opposition from antitrust authorities, as TNT has virtually no presence in the US, while the European market is highly fragmented.
The agreed deal, UPS's largest ever acquisition, offers TNT shareholders €9.5 per share. TNT's largest shareholder, Dutch postal company PostNL, said it has committed to tendering its 29.9 percent stake to UPS.
The UPS bid represents a 54 percent premium to TNT's closing price on Feb. 16, but is only 5.6 percent higher than the €9 "informal" offer UPS made the following day, which TNT's management rejected.
TNT shares closed at €9.35 on Friday in expectation of a higher offer. They rose 1.1 percent to €9.447 in Amsterdam, signaling investors believe the offer will almost certainly be accepted.
"The token 50 cents improvement on last month's informal proposal is hardly surprising," said SNS Securities analyst Geert Steens. "TNT Express has since released disappointing results, confirming the sad state of most of its non-European businesses."
He advised investors to "take what is currently on the table."
On Feb. 21, TNT reported a loss of €173 million ($229 million) for the fourth quarter, including a €104 million charge on its Brazilian arm and another €45 million to write down the value of its airplane fleet. Revenues rose 2.8 percent to €1.85 billion ($2.5 billion).
Challenged on why UPS wants to expand in Europe at a time the continent's economy is faltering in the wake of a raging debt crisis, CFO Kuehn said it shows the company's "long-standing commitment to Europe."
He said the deal will add to earnings per share in the first year, and that by 2015 the companies will save at least €440 million annually from combining operations, including air fleets, as well as software and logistics systems.
However, UPS expects to spend a one-time €1 billion to realize those savings.
Kuehn declined to answer questions about potential sales of operations or job cuts at TNT. He said he expects the deal to close in the third quarter of 2012.
UPS's offer includes a provision that would award TNT €200 million if the deal fails to win regulatory approval. It also specifies TNT can only consider competing bids 8 percent higher and must pay UPS €50 million if it breaks off the deal.
However, TNT Chief Executive Marie-Christine Lombard said she had not been contacted by the most likely alternative bidder, FedEx Corp., and FedEx has so far said it is not interested in TNT.


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