United Parcel Service Inc. proposed concessions in 13 of the European Union’s 27 states as it tries to win EU approval for its 5.16 billion-euro ($6.74 billion) bid for TNT Express NV, two people familiar with the matter said.
UPS is offering to mainly sell TNT businesses in smaller European markets, said the people, who asked not to be identified because the negotiations are private. The remedies exclude Germany, France, Italy, Spain and the U.K., they said.
UPS, the world’s largest parcel-delivery company, submitted an offer to regulators last week that included the sale of some business units and granting access to its air network. Atlanta-based UPS has twice pushed back the target date to complete the biggest acquisition in its 105-year history, which will double its size in Europe, as the merger review continues. EU regulators’ deadline for a ruling is now Feb. 5.
“We want to give way for another integrator given that one integrator wants to merge with the biggest one,” EU Competition Commissioner Joaquin Almunia said today at an event in Brussels, referring to parcel-delivery firms that offer air-freight services. “We cannot afford” to allow Europe’s delivery industry to proceed “only with two integrators,” he said, without mentioning specific companies.
UPS’s rivals and customers are being asked to comment on the company’s proposal and their feedback will be used by the EU to determine whether the offer is sufficient to resolve competition problems. Regulators sent formal objections to UPS in October, saying TNT and Deutsche Post’s DHL, the market share leader, are UPS’s main competitors for next-day express deliveries within Europe, according to a person familiar with the regulators’ complaint.
Almunia said regulators were currently market testing the concessions and “even during the market test process some improvements in the proposed remedies took place.” He said the EU still had to receive the results of the process and would come back to UPS and TNT with its analysis.
“It seems positive that UPS is being proactive in finding ways to appease the EU’s concerns,” said Damian Brewer, a London-based RBC Capital Markets analyst who rates TNT underperform.
“UPS will no doubt be mindful of ensuring it strikes the right balance of remedies -- avoiding navigating its shareholders into otherwise becoming the capital providers for a European express backbone for competitors,” he said prior to Almunia’s comments.
TNT gained as much as 4.9 percent to 8.01 euros and was up 4 percent as of 12:28 p.m. in Amsterdam trading, valuing the Dutch company at 4.3 billion euros.
While they don’t exclude UPS units, the concessions submitted mainly affect smaller TNT subsidiaries, assets, customer contracts and personnel, one of the people said. That would allow UPS to retain the most important synergies in the biggest markets, another person said.
“We said on Friday we won’t get into details, and we’re not going to,” Peggy Gardner, a spokeswoman for UPS, said yesterday regarding the proposed remedy package. Hoofddorp, Netherlands-based TNT spokesman Ernst Moeksis said TNT and UPS remain committed to completing the transaction in early 2013.
Should the European Commission rule in favor of the remedies, UPS would then have about six months to complete the asset sales, one of the people said.
UPS’s bid for TNT required “substantial remedies” to eliminate EU antitrust concerns, Almunia said in a Nov. 2 speech. Regulators still have time before they need to prepare a decision on the UPS-TNT deal, he said yesterday.
“After Christmas we will need to have a draft decision and for this time we will need to make up our final opinion regarding the capacity of the remedies finally proposed by UPS and TNT,” he told reporters yesterday.
EU regulators prefer merger remedies that are “simple, workable and easy to implement,” Alexander Italianer, the antitrust agency’s most senior official, said at a Brussels conference yesterday.
An offer to access critical technology or infrastructure needs to be straightforward and must be monitored effectively to be successful, he said. He didn’t refer to the UPS-TNT transaction.