TNT Express Faces Investor Pressure for Improved UPS Deal

UPS, TNT Express Said to Near Agreement After Initial Rejection
United Parcel Service Inc. cargo at Mather Airport in Sacramento. Photographer: Ken James/Bloomberg

United Parcel Service Inc. is nearing an agreement to buy TNT Express NV, 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.

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. With expansion already under way in Germany, UPS might cut overlap there and elsewhere in Europe to satisfy competition regulators, said Kevin 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’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.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE