Monday 02 April 2012 | By
United Parcel Service (UPS), the world's largest parcel distribution company, is to buy TNT Express in a €5.16 billion deal as a means to help it expand in Europe and boost its presence in emerging markets such as Australia, Brazil and China. TNT, based in Hoofddorp in the Netherlands, is the second-largest express mail company in Europe behind German-owned DHL.
The news comes a month after TNT rejected a €4.9 billion offer from UPS and after repeated attempts over a number of years by both UPS and FedEX, its US rival, to acquire their Dutch competitor. The deal is UPS’s biggest since it was founded back in 1907 in Seattle, though it is now headquartered in Atlanta.
UPS delivers some 15.8 million packages and documents per day, with nearly 100,000 vehicles and a fleet of 223 jets – which makes the firm a larger aircraft operator than EasyJet! In comparison, TNT uses only 30,000 vehicles and 46 aircraft to deliver almost a million consignments per day. With UPS controlling 7.7% of the European express delivery market and TNT 9.6%, the acquisition brings UPS up to equal status with DHL, owned by Deutsche Post, which has a 17.6% share. TNT's largest shareholder – the Dutch postal company, PostNL – has backed the deal. PostNL is also the owner of TNT Post UK, Royal Mail's largest competitor, but this company is not involved in the UPS deal.
UPS and TNT Express believe the tie-up will significantly enhance their ability to serve their clients' complex global logistics needs. Following the deal, around 36% of the combined group's revenues will be generated outside the USA, up from 26% today at UPS.
"TNT Express fits into UPS's long-term network plan," commented Scott Davis, Chief Executive of UPS. "This broadens UPS's global footprint," he added. The combined business will generate revenues of €45 billion per year and expects to achieve up to €550 million in cost savings within four years. Unions in the low countries have expressed concerns over possible job cuts at TNT – which employs some 77,000 people – but Scott Davis said it was "way too early" to talk about redundancies.
Commented Marie-Christine Lombard, CEO of TNT Express, "This combination will significantly enhance the capabilities of two strong companies. I am convinced that together we will be the supplier and employer of choice in the express delivery industry. Our customers will greatly benefit from our enhanced combined service offerings.”
Potential hurdles still remain, however. FedEx has responded by saying that it is focused on profitable organic growth within Europe, which appears to scupper rumours of a rival bid, but this is still a possibility. In addition, the transaction will face detailed scrutiny from regulators, particularly in Europe.