PostNL NV is being asked to reveal plans to restore its dividend and raise its share price after losing out on 1.54 billion euros ($2.1 billion) as United Parcel Service Inc. scrapped a takeover of TNT Express NV this month.
PostNL, a Dutch mail service with operations in the U.K., Germany and Italy, would have obtained the cash for its 29.8 percent of TNT, potentially allowing the Amsterdam-based company to cut debt and pay a dividend.
“We believe PostNL is deeply undervalued,” said Fabrice Seiman, co-chief executive officer of hedge fund Lutetia Capital, who sent a letter to PostNL’s CEO Jan. 18 pushing for contingency measures. “The company must lay out a plan for a dividend payment to shareholders and present a credible path.´´
Werner van Bastelaar, a PostNL spokesman, said the company took note of Seiman’s letter and wouldn’t comment on details of a contingency plan before Feb. 25, when the company will present fourth-quarter earnings. PostNL Chief Financial Officer Jan Bos said on Nov. 5 that PostNL had a plan if the UPS deal failed. CEO Herna Verhagen said Jan. 14 that she expects to sell the TNT stake “over the medium term´´ after stability returns to TNT Express.
UPS scrapped its offer of 9.50 euros a share on Jan. 14 after European regulators signalled they may block the deal. PostNL dropped 36 percent on the day, its biggest fall since June 1998, while TNT declined 41 percent.
Seiman said in a phone interview from Paris that PostNL should not rush to sell its TNT stake and should try to maximize value for shareholders.
“Management have to better communicate on the future cash flows,” Seiman said. “PostNL’s management should detail a road map to restore the share price.”
PostNL shares rose 5.7 percent to 1.88 euros at 1:32 p.m. in Amsterdam today, paring the decline to 36 percent this year and giving the company a market value of 827 million euros. TNT Express climbed 0.3 percent to 5.47 euros, paring the fall to 35 percent this year and valuing PostNL’s stake at about 886 million euros.
Seiman said that in his letter to PostNL he also urged the company to reduce pension costs.
PostNL is finalizing an agreement with its trade unions to reduce the pension burden by making it mandatory for employees to contribute to the system. Two unions have agreed to the changes and the company is awaiting approval from the third shortly, spokesman Van Bastelaar said.
PostNL said on Nov. 5 that it expected full-year operating income at the lower end of a range of 110 million euros to 160 million euros as a delay in reorganization affected planned savings and implementation costs. It forecast that revenue would be in line with 2011, when it was 4.28 billion euros. The company had net debt of 1.22 billion euros at Sept. 29.
Moody’s Investors Service downgraded PostNL’s credit rating on Jan. 17 to Baa2, the second-lowest investment grade, and placed it under review for a further downgrade, as the company won’t receive cash from UPS for the TNT Express stake to lower debt.