UPS Said to Seek Accord on TNT Deal as Soon as Next Week
United Parcel Service Inc. (UPS) is seeking to reach an agreement to buy TNT Express NV (TNTE) as soon as next week after making progress in discussions on jobs and pensions, according to two people with knowledge of the talks.
Negotiations are now primarily focused on price, said one of the people, who declined to be identified because details are private. TNT may struggle to get much beyond a Feb. 11 offer of 9 euros ($11.86) a share because the stock is at 9.35 euros and the company posted a full-year operating loss, the person said. Talks could still break down, and a deal may not be completed.
UPS said earlier today that talks had been “constructive” since Hoofddorp, Netherlands-based TNT rejected that $6.4 billion bid. Buying TNT, Europe’s second-largest package- delivery company, would put Atlanta-based UPS on equal footing in the region with Deutsche Post AG (DPW)’s DHL, the market leader.
“I’m pretty confident they’ll reach an agreement,” said David Campbell, an analyst at Thompson Davis & Co. in Richmond, Virginia. “UPS has spent a lot of time with TNT and looking at their business and they wouldn’t have done that if they weren’t serious about getting a deal done.”
TNT’s board was unhappy with terms attached to the February offer that may have required divestitures to win regulatory approval, possibly leading to job cuts, a person familiar with the matter said last month.
The two companies will need to respond to possible antitrust concerns in Europe, one of the people with knowledge of the talks said today. An agreement has been reached on plans for TNT’s European headquarters, that person said.
Norman Black, a spokesman for UPS, and TNT’s Ernst Moeksis declined to comment on the negotiations.
TNT gained 1.3 percent to 9.35 euros in Amsterdam, while UPS slid 0.7 percent to $78.41 at the close in New York. The U.S. company said in a statement before trading began that talks with TNT had been extended, with a goal of sending a bid to Dutch regulators within 12 weeks of the Feb. 17 announcement that bargaining had begun. That timeline would end on May 11.
TNT was spun off in May from the Dutch postal operator, which is now named PostNL (PNL) and retains a 29.9 percent stake, according to data compiled by Bloomberg. TNT, whose name derives from the postwar Australian company Thomas Nationwide Transport, sold its Indian domestic road business in December and has been hurt by costs from revamping unprofitable Brazilian operations.
A bid from UPS, the world’s largest package-delivery company, or chief competitor FedEx Corp. (FDX) had been anticipated for years as the U.S. companies studied European expansion. That talk gained momentum after the spinoff of the express business.
UPS controlled 7.7 percent of the European express-parcels market in 2010, compared with TNT’s 9.6 percent, according to Transport Intelligence. Combined, they would be about as large as DHL, which had a 17.6 percent share.
Overlapping operations, particularly in Europe, could produce synergies for UPS worth in excess of 400 million euros, according to Andre Mulder, an Amsterdam-based Kepler Capital Markets analyst who recommends buying TNT shares.
“This is a once-in-a-lifetime opportunity,” Mulder said on Feb. 19. “Of the four major players globally, TNT is the smallest one, so it’s the last opportunity.”
UPS has completed the acquisition of Brussels-based Kiala to bolster delivery operations in Belgium, France, the Netherlands, Spain and Luxembourg, after several smaller purchases in recent years, according to Campbell, the Thompson Davis analyst. He recommends buying UPS and FedEx.