UPS To Acquire TNT Express For €5.16B In All-Cash Deal

U.S.-based United Parcel Service Inc. (NYSE: UPS), the world's No. 1 package courier, will buy Dutch rival TNT Express NV (AMS: TNTE) after raising its all-cash offer nearly 6 percent to €5.16 billion ($6.8 billion), the companies said Monday.

UPS will pay €9.50 a share in cash for Europe's second-biggest express-delivery provider, up from a bid in February of €9 a share and 54 percent higher than TNT shares' closing price Feb. 16, the day before the talks were made public, the companies said in a joint statement

On Feb. 11, TNT rejected UPS's informal offer, which valued the target company at about €4.9 billion. UPS had first approached TNT with an offer of €8.25 a share last November.

The additional capabilities and broadened global footprint will support the growth and globalization of our customers' businesses, said UPS Chairman and Chief Executive Scott Davis.

This combination will significantly enhance the capabilities of two strong companies. I am convinced that together we will be the supplier and employer of choice in the express delivery industry, TNT Express CEO Marie-Christine Lombard said.

The deal finalized Monday is the biggest in UPS's 105-year history and will challenge the dominance in Europe of Deutsche Post AG (Frankfurt: DPW).

However, the German company said it expects antitrust authorities to have reservations about the UPS-TNT deal, Dow Jones Newswires reported.

UPS and FedEx Corp. (NYSE: FDX) already enjoy a 1-2 ranking in the United States and UPS is now trying to replicate that duopoly in Europe through its TNT Express acquisition, Deutsche Post spokesman Dirk Klasen told the news service.

The deal would give UPS a market-leading position on the continent and lift its global ranking above that of FedEx and Deutsche Post's DHL unit.

UPS Chief Financial Officer Kurt Kuehn said earlier Monday that he expects the deal to meet approval of European Union antitrust authorities without an in-depth investigation. But he declined to elaborate on any remedies that may be needed to secure EU approval, Dow Jones reported.

UPS, which is based in Atlanta, agreed to a reverse breakup fee of €200 million or about 3 percent of the deal's value, that it would pay TNT Express if the deal fell through.

UPS will have €45 billion in revenue, about 36 percent generated outside the United States, following its takeover of unprofitable TNT Express. The combination will bring pretax cost savings of €400 million to €550 million annually after four years, the companies said.

TNT announced last month a fourth-quarter net loss of €173 million.

I thought that a lot of shareholders would have accepted €9, Bloomberg News quoted Credit Suisse analyst Neil Glynn as saying, adding that he has a neutral rating on TNT Express. I think UPS is paying a very, very big number. The synergies they're seeing are pretax, it's important to remember.

An analyst with a buy rating on TNT Express, Kepler Capital Markets' Andre Muller, told Bloomberg: The offer is disappointingly low. If you compare it to the price when the company was split off last May, it's only a few tenths of cents higher. I do expect some of the shareholders to say that this isn't really a premium.

UPS shares were up $2.74, or 3.5 percent, to $81.15 early Monday afternoon, giving the company a market capitalization of over $76 billion.

TNT Express rose as much as 18 cents, or 1.8 percent, to €9.52 on Monday in Amsterdam, valuing the company at €5.17 billion.