Package delivery giant on track

There is a giant package delivery company in the making, as the world’s number one, the US major United Parcel Service (UPS), is in the process of taking over its European peer, TNT Express. UPS will pay an increased US$6.85-billion – up from the US$6.4-bn offered a month earlier – for Dutch-based TNT, they said, in a deal that will boost the US company’s presence in Europe and create a logistics giant with US$60 bn in annual sales. The new offer has met with approval at TNT, with its executive and supervisory boards unanimously intending to support UPS’s offer of marginally less than US$12.50 per share. Also, TNT’s biggest shareholder, Dutch mail company PostNL – which owns 29.8%, and had reportedly been holding up the earlier deal – said it supported the new deal. Reports in the international press indicated that the offer ended years of speculation about the future of the Dutch delivery company, which was split from previous owner, PostNL, and listed last year. They pointed out that a falling profit and a poor outlook for 2012 had seen TNT’s management coming under intense pressure from activist shareholders, who no doubt see the UPS takeover as a path towards consolidated profit from the combined unit. At the same time, the deal helps UPS gain a bigger share of business outside the US, where the integrator currently derives only 26% of its revenues. Forecasts from observers are that, once UPS integrates TNT Express into its system, that number will rise by 10%. They also suggested that TNT has long been a target for the world’s largest package delivery company – as a way of helping it grow in Europe, especially Britain, France and Germany and TNT’s home base of the Netherlands. Also, TNT has a large road network in South Asian, which would immediately give UPS a distinct presence in the Asian market. There is, however, an incipient problem attached to the takeover. It has been pointed out that the combined company would likely claim a majority of the market in some European countries – a situation which could well trigger the European antitrust laws. The answer to this, analysts added, would be that UPS could then either divest, or would have to come up with a new plan for those countries. As a display of UPS’s muscle, the company – despite facing a contracting global trade market – has just announced record fourth quarter results in 2011. Its total revenue increased 6% to US$14.2 bn and adjusted operating profit climbed 17% to more than US$2 bn.