UPS to buy Dutch delivery company TNT Express for $6.8 billion
Atlanta-based UPS is the world's largest delivery company, while TNT, headquartered in Hoofddorp, Netherlands, is the second-biggest express mail company in Europe behind Germany's DHL.
Atlanta-basedÂ UPSÂ is the world's largest delivery company, whileÂ TNT, headquartered in Hoofddorp, Netherlands, is the second-biggest express mail company in Europe behind Germany's DHL. The combination will have 475,000 employees worldwide and increase UPS's international sales to around 36 percent of its total from 26 percent at present.
"Why isÂ TNTÂ very attractive?" saidÂ UPSÂ Chief Financial Officer Kurt Kuehn at a press conference in Amsterdam. Because it has "operations in areas where we're underserved. Brazil. Australia. The Middle East. The road and train network in Europe."
He saidÂ UPSÂ hopes to further boost its international sales to 50 percent in the next five years.
The merger is not expected to face serious opposition from antitrust authorities, asÂ TNTÂ has virtually no presence in the U.S., while the European market is highly fragmented.
The agreed deal, UPS's largest ever acquisition, offersÂ TNTÂ shareholders â‚¬9.5 per share.Â TNT'sÂ largest shareholder, Dutch postal company PostNL, said it has committed to tendering its 29.9 percent stake toÂ UPS.
TheÂ UPSÂ bid represents a 54 percent premium toÂ TNT'sÂ closing price on Feb. 16, but is only 5.6 percent higher than the â‚¬9 "informal" offerÂ UPSÂ made the following day, whichÂ TNT'sÂ management rejected.
TNTÂ shares closed at â‚¬9.35 on Friday in expectation of a higher offer. They rose 1.1 percent to â‚¬9.447 in Amsterdam, signaling investors believe the offer will almost certainly be accepted.
"The token 50 cents improvement on last month's informal proposal is hardly surprising," said SNS Securities analyst Geert Steens. "TNTÂ Express has since released disappointing results, confirming the sad state of most of its non-European businesses."
He advised investors to "take what is currently on the table."
On Feb. 21,Â TNTÂ reported a loss of â‚¬173 million ($229 million) for the fourth quarter, including a â‚¬104 million charge on its Brazilian arm and another â‚¬45 million to write down the value of its airplane fleet. Revenues rose 2.8 percent to â‚¬1.85 billion ($2.5 billion).
Challenged on whyÂ UPSÂ wants to expand in Europe at a time the continent's economy is faltering in the wake of a raging debt crisis, CFO Kuehn said it shows the company's "long-standing commitment to Europe."
He said the deal will add to earnings per share in the first year, and that by 2015 the companies will save at least â‚¬440 million annually from combining operations, including air fleets, as well as software and logistics systems.
However,Â UPSÂ expects to spend a one-time â‚¬1 billion to realize those savings.
Kuehn declined to answer questions about potential sales of operations or job cuts atÂ TNT. He said he expects the deal to close in the third quarter of 2012.
UPS's offer includes a provision that would awardÂ TNTÂ â‚¬200 million if the deal fails to win regulatory approval. It also specifiesÂ TNTÂ can only consider competing bids 8 percent higher and must payÂ UPSÂ â‚¬50 million if it breaks off the deal.