FedEx Aided by Strong Dollar in ‘Perfect-Timing’ Bid for TNT

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Fred Smith: FedEx, TNT Businesses 'Highly Complementary'

FedEx Corp.’s plan to buy Dutch parcel-delivery company TNT Express NV highlights how a strong dollar is facilitating purchases by U.S. companies in Europe.

FedEx agreed to pay 4.4 billion euros ($4.8 billion) for TNT. That’s $2.1 billion, or 30 percent, less than United Parcel Service Inc.’s offer in 2012, an approach that foundered as regulators balked. FedEx said the dollar’s strength contributed to “perfect timing” on its bid, with the euro down more than a fifth against the greenback in the past year.

“North American and Asia Pacific acquirers are becoming increasingly focused on European targets,” Chris Ventresca, global co-head of mergers and acquisitions at JPMorgan Chase & Co., said by e-mail. Buyers are more confident in a European economic rebound, and “coveted targets that felt overpriced in years past suddenly may be more sensibly valued when taking into account the acquirer’s stronger foreign exchange rates.”

U.S. suitors announced $195.5 billion of acquisitions of Western European companies in the past 12 months, more than twice the value of a year earlier, according to data compiled by Bloomberg. The last two quarters of 2014 were two of the three busiest by value in more than seven years, the data show.

U.S. companies by themselves or as part of a group have announced acquisitions of 1,244 companies in Western Europe in the past 12 months, and completed 1,001 of them, the data show.

Larger Deals

Among the larger deals, Ball Corp., a U.S. maker of beverage cans, in February agreed to buy London-based Rexam Plc for $6.8 billion, less than it would have cost a year earlier thanks to the relative strength of the dollar and U.S. stocks against European counterparts. The British pound has fallen 10 percent against the U.S. currency in the past year.

By value, almost half of the acquisition targets were based in the U.K., while companies from France and Germany together accounted for 21 percent. Industrial and financial companies were the largest industry groups among the targets.

For FedEx, buying Hoofddorp, Netherlands-based TNT “catapults the company into a dominant player in Europe,” Helane Becker, an analyst with Cowen & Co., said in a note to clients. Memphis, Tennessee-based FedEx was able to take advantage of “cheap debt financing, the euro tanking and UPS going through its own restructuring.”

David Bronczek, the chief executive officer of FedEx Express, sounded a similar note.

“The timing for now is best for us,” Bronczek told journalists in Amsterdam. “We see the European economy improving and the stronger dollar, and we went through a profit-improvement plan that’s been very successful, so the timing worked out perfectly.”

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