A third major player in package delivery is expected to emerge in Europe following the announcement that the US parcel delivery giant FedEx has agreed to buy Dutch rival TNT Express for ?4.4bn (?3.2bn).
The deal will give the US firm access to TNT?s European road network, and create a substantial competitor to DHL and UPS.
TNT?s executive and supervisory boards have unanimously recommended the deal. Its largest shareholder, PostNL, has agreed to sell its 14.7% shareholding. FedEx will pay ?8 in cash for every TNT share, a 33% premium over TNT?s closing price of ?6 in Amsterdam on 2 April.
Two years ago, UPS tried to take over TNT but its ?5.2bn bid was blocked by EU competition authorities. Unlike FedEx, UPS already had a strong European network when it made its ?9.50 a share offer.
That deal would have seen the creation of the biggest European group in the fight for the global parcel market. The deal was torpedoed after EU competition authorities said it would have restricted competition on the continent.
Since then, TNT has revamped its business, selling operations and investing in its road network in a weak European market for business package deliveries.
In a joint statement, FedEx and TNT said they would ?cooperate to avoid any significant redundancies in the global or Dutch workforces? and ?existing employment terms of TNT Express will be respected?. They plan to keep TNT?s hub in Li?ge, Belgium, but will sell its airline operations in compliance with airline ownership regulations.
Data from 2013 puts DHL at a 19% market share in Europe with UPS at 16% while TNT was at 12% and FedEx 5%.
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?This transaction allows us to quickly broaden our portfolio of international transportation solutions to take advantage of market trends ? especially the continuing growth of global e-commerce ? and positions FedEx for greater long-term profitable growth,? FedEx CEO Frederick W. Smith said in the statement.
Both FedEx and TNT Express said they were confident the deal will be passed by regulatory authorities.
?The transaction will increase competition in Europe. We say a third strong competitor in this marketplace is essential,? FedEx Express chief executive David Bronczek said. He said the FedEx and TNT Express networks are ?extremely complementary?.
?TNT has an exceptional European road platform. It will greatly improve our ability to serve European customers,? he said. ?FedEx has always been recognised to have a need for a stronger pan-European ground network to complement our strong intercontinental network.?
TNT chief executive Tex Gunning said the deal is ?much better and simpler? than the UPS takeover. ?While we did not solicit an acquisition, we truly believe that FedEx?s proposal, both from a financial and a non-financial view, is good news for all stakeholders,? he said.
?Our people and customers can profit from the true global reach and expanded propositions, while with this offer our shareholders can already reap benefits today that otherwise would only have been available in the longer run.?
Gunning brushed off reports that the deal would lead to job cuts at TNT Express, which employs some 65,000 people worldwide. ?There is little overlap, our businesses are complementary,? he said.
The two companies expect the deal to close in the first half of 2016.
Andre Mulder, an analyst with financial services company Kepler Cheuvreux, said an opportunity for FedEx arose when the UPS deal was blocked.
?It was a deal long overdue. I think FedEx was from the start the most logical partner of TNT. Because of its very low market share in Europe, I think it is better to buy a company in one stroke than to go through a lengthy process of buying all the companies in markets in Europe and integrate them,? he said.
?By acquiring TNT, FedEx gets a useful exposure on the ground in Europe.?
TNT
TNT Express operates in more than 200 countries and maintains a leading role in the road freight network in Europe. The company went through extensive restructuring after the UPS bid failed, announcing in March 2013 that 4,000 jobs would be slashed ? or 6% of its total workforce ? over the next three years.
FedEx
FedEx employs more than 320,000 people worldwide with an annual turnover of $47bn. Based in Memphis, Tennessee, the company will finance the deal with debt. The company began operations on 17 April, 1973, when 14 aircraft took off from Memphis to deliver 186 packages to 25 cities following an idea which was sketched out by Fred Smith while studying at Yale eight years previously.
