Chris Hughes is a Bloomberg Gadfly columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

There are many reasons why PostNL of the Netherlands was right to reject a 2.4 billion-euro ($2.6 billion) takeover proposal from Belgium's post office. The only difficulty is sorting them into order.

Europe's mail giants are grappling with the decline of their traditional letter business and the growth of nimble private operators that are increasingly handling packets and parcels for the likes of Amazon. Bpost thinks buying PostNL would help both adapt to this new world.

The financial terms are tempting, but hardly a knockout: Bpost's cash-and-shares pitch is valued at about 5.41 euros per PostNL share based on the suitor's stock price on Friday. That's a 26 percent premium to PostNL's share price reports BPost was working on the plan surfaced. It's also 35 percent more than the stock's three-month average.

Low Premium
Bpost's offer would be about 35 percent more than PostNL's three-month average stock price
Source: Bloomberg

This would be a low premium for selling out. The valuation it puts on the business isn't stellar either: Factoring assumed debt, the proposal equates to six times PostNL's expected 2017 Ebitda and a price-earnings multiple of 12. That's pretty much where U.K. peer Royal Mail Group Plc trades, but below German peer Deutsche Post AG and CTT-Correios de Portugal SA.

2nd Class Offer
Bpost's pitch for PostNL doesn't offer a valuation that stands out from the industry
Source: Bloomberg
Note: Multiple is enterprise value versus 2017 Ebitda

Just half the proposal is in cash, so PostNL shareholders need to be persuaded as to why they should own shares in the enlarged company.

But it's not obvious why the combination will grow faster than PostNL alone. The overlap between the businesses is limited, which means cost savings are likely to be slight. Bpost's argument is that scale and financial firepower will help the group invest.

Worse, governance would take a step back. The Belgian government owns 51 percent of Bpost, a holding that will be reduced to 40 percent if the deal happened. It would also nominate three board seats.

That kind of stake is big enough to hold sway over strategy and determine the outcome any future M&A opportunities that might emerge. It's worse when the shareholder is a state entity lacking entrepreneurial nous.

PostNL shareholders should be open-minded about selling at a price that compensates for switching into a company with comparable prospects, at best, and notably worse governance. But BPost isn't offering that right now.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Chris Hughes in London at

To contact the editor responsible for this story:
Edward Evans at