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.