Moving Forward Sans Merger - Research Report on United Parcel Service, Inc.
After anticipating the European Commission to block the merger between UPS and
TNT, UPS decided to drop the $6.8 billion bid to acquire TNT.
NEW YORK, January 24, 2013
NEW YORK, January 24, 2013 /PRNewswire/ --
On withdrawing its offer, United Parcel Service, Inc. (NYSE: UPS) [Full
Research Report]^[^1^] paid a termination fee of $265.5 million to Dutch
shipping company, TNT Express. The European Commission announced that their
objection is primarily due to concerns about future market competition for
overnight delivery of parcels across Europe.
If ever the merger happens, this is good news for TNT, but could mean bad news
for other messenger companies in Europe. Considered as the world's largest
package delivery company and the leading global provider of specialized
transportation and logistics services, UPS could have given TNT the chance to
dominate the European market.
But the European Commission feared that the merger could negatively influence
the market dynamics as UPS would have monopolized the delivery business in
Europe and might bring unfair competition, affecting pricing policies and
services, thus impacting end-users.
Although UPS can sustain and move forward without the acquisition, it is still
a big disappointment for the company, as its chances of boosting its footprint
in Europe and consolidating its position as a global leader did not
materialize. It could also mean losing significant synergies for UPS.
TNT could have been UPS' biggest acquisition. Despite this failed agreement,
the company is still aiming to acquire smaller companies. "While we viewed the
acquisition as a compelling growth platform, our financial strength allows UPS
to capture future opportunities," said Scott Davis, UPS Chairman and CEO.
Analysts' equity summary score for UPS is bullish at 7.9 with a neutral
recommendation, given this renewed focus on core operations, allowing for
potential margin expansion.
The company has also been upgraded from a "hold" rating to a "buy" rating, as
analysts see a more aggressive capital deployment and fewer headwinds
constraining share performance following the merger termination between UPS
On the other hand, TNT shares went down 41% by last Monday's market close
after the failed acquisition. Looking beyond this, analysts are still
confident with TNT, believing that with the company's exposure to the Asia
Pacific and Brazil, it is still an attractive takeover target.
Considering the market situation of both companies, there is definitely life
after UPS for TNT, and vice versa. In the first place, many investors were
cautious and not confident with the merger, resulting for both shares to go
down. The failed acquisition was actually a relief. Both companies can now
focus on the growth of their core operations. The lesson here is some things
are better left alone.
^[^1^]The Full Research Report on United Parcel Service, Inc. - including
full detailed breakdown, analyst ratings and price targets - is available to
download free of charge at:
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