UPS’s Dropped TNT Acquisition Is Formally Blocked by EUAoife White
United Parcel Service Inc.’s aborted takeover bid for TNT Express NV was formally blocked by European Union regulators because UPS failed to find a suitable buyer for parts of TNT to ensure competition for delivery services wouldn’t be crushed.
UPS’s inability to sign a binding deal with a potential purchaser of TNT units in 17 countries led regulators to conclude that its divestment plan was insufficient, the EU’s antitrust chief said today.
Competition Commissioner Joaquin Almunia said he told UPS that the TNT takeover “probably would require an up-front buyer” or a bid from another delivery company with air-freight capability such as FedEx Corp. -- which didn’t signal any interest in TNT assets.
UPS, the world’s largest parcel-delivery company, said two weeks ago it was scrapping the 5.16 billion-euro ($7 billion) transaction after the European Commission warned of a ban. The Atlanta-based company sought to buy TNT to double its business in Europe and vault it to equal footing there with Deutsche Post AG’s DHL, the market-share leader.
“UPS clearly was not ready or was not in favor or was not prepared to explore” signing a deal with a purchaser until it was “much too late for it to materialize,” Almunia told reporters at a Brussels press conference.
“We still had serious doubts” about whether the buyers UPS was working with “had the incentive and the ability to become a strong player in express deliveries,” he said, citing La Poste SA’s DPD unit.
UPS formally withdrew its offer for TNT after today’s announcement, saying it was “disappointed” in the EU decision, according to an e-mailed statement. It will pay a fee of 200 million euros to TNT within 10 days of terminating the deal, the biggest in its history, according to a filing yesterday.
“UPS proposed significant and tangible remedies designed to address the EC’s concerns,” the company said in the statement today. “UPS believes that the combined company would have been transformative for the logistics industry, bringing meaningful benefits to consumers and customers around the world.”
The EU blocked the deal because combining UPS and TNT would have increased prices for express delivery in 29 countries, Almunia said. FedEx’s limited reach across Europe meant some customers would only be able to choose between UPS-TNT and DHL for next-day deliveries.
UPS sought to address these concerns by offering to divest TNT’s businesses in 15 countries in eastern Europe and Scandinavia as well as units in Spain and Portugal under certain conditions. It also offered to boost a smaller rival by giving it access to its air network for five years and helping it increase its volume of small package deliveries.
FedEx Corp. was “the only possible suitable purchaser” for the units among delivery firms with air-freight services, the EU said, because any bid by DHL would also lead to similar antitrust concerns. FedEx told the EU it wasn’t interested in buying any of the TNT assets or in outbidding or making an alternative bid for the entire company, Almunia said.
FedEx has “no comment on the decision, but we are continuing our expansion strategy in Europe,” spokesman Greg Morsbach said in an e-mailed statement on the EU ruling. “Our strategy includes both organic growth and selective acquisition of companies.”
DPD wasn’t deemed a viable rival competitor to the large companies because it didn’t have the volume of deliveries or an incentive to invest in an air network after the initial five years, the EU said.
Almunia said he was surprised UPS decided to withdraw from the deal earlier this month because they still had time to resolve the EU’s concerns. TNT shares fell to a record low on Jan. 14 after UPS said it would end the deal.
Ernst Moeksis, a spokesman for Hoofddorp, the Netherlands-based TNT, referred to the company’s statement earlier this month where it said it regretted the end of a takeover attempt it believed was feasible and beneficial.
UPS and TNT declined to comment on whether they would challenge the EU merger ban at the EU General Court in Luxembourg.
The deal is the third to be blocked by Almunia since he became the EU’s antitrust chief in 2010. He defended his record, saying he has approved 800 other deals.