FedEx Corp. agreed to buy Dutch parcel delivery company TNT Express NV for 4.4 billion euros ($4.8 billion), predicting it can succeed where bigger rival United Parcel Service Inc. was blocked by regulators in 2013.
TNT investors will receive 8 euros a share in cash, 33 percent more than the closing price on April 2, the most recent trading day. That’s less than UPS’s January 2012 offer of 9.50 euros, a reflection in part of a deal that has fewer synergies for FedEx, TNT Chairman Antony Burgmans said.
FedEx, calling the purchase a “match made in heaven,” said the timing was right for the approach, with a stronger dollar and a budding European recovery. FedEx has a chance to succeed where UPS failed as it has less overlap with TNT and has agreed to shed TNT’s airline operations in an effort to win approval.
“FedEx will know the pitfalls UPS faced,” said Damian Brewer, an analyst at RBC Capital Markets in London, adding the price is in line with similar deals. While FedEx’s offer is lower than what UPS was prepared to pay at the time, financial metrics at the Dutch company have deteriorated since, he said.
TNT rose 29 percent to 7.77 euros in Amsterdam, while FedEx jumped 3.9 percent to $173.14 at 10:02 a.m. in New York.
“We plan to be very aggressive in the first year investing in the integration of this business,” FedEx Chief Financial Officer Alan Graf said on a conference call. TNT will have minimal impact on FedEx earnings in fiscal 2016 and 2017. “We expect TNT to be very accretive to earnings thereafter.”
UPS scrapped its bid in January 2013 after European competition regulators moved to block the deal, arguing that it would limit some shipping customers’ choices for next-day deliveries to just UPS and DHL, a unit of Deutsche Post AG. The watchdog formally blocked UPS’s TNT bid because the Atlanta- based company failed to find a suitable buyer for parts of TNT to ensure that competition for delivery services wouldn’t be squelched.
Source: Bloomberg | Mary Schlangenstein, Richard Weiss and Elco van Groningen