More Details Emerge in FedEx Acquisition of TNT-NV

So far, so good may be the best way to describe the current state of progress in the negotiating process regarding the announcement made last month by FedEx that it plans to acquire Netherlands-based TNT-NV and a provider of mail and courier services and the fourth largest global parcel operator for $4.8 billion.

In a joint release issued by the companies last week, FedEx and TNT said they “are making timely progress on its preparations for the Offer.”

FedEx expects to submit a request for review and approval of its Offer Document with the Netherlands Authority for the Financial Markets [AFM] in any event before June 30, 2015, which is the date under which Dutch law a request for approval must be submitted to the AFM.”

The companies also explained that the process to obtain the required regulatory merger control approvals for the Offer is proceeding without delays, with the Offer conditional upon FedEx obtaining the required competition clearances in the European Union, China, Brazil, and, to the extent applicable, the United States.

“FedEx and TNT Express remain confident that substantive anti-trust concerns, if any, can be addressed adequately and in a timely fashion,” the companies said. “Although FedEx and TNT Express aim to obtain the required regulatory clearances as soon as possible, it is noted that completing the formal clearance procedures could take up to one year. As such, it may be required to obtain an exemption from the AFM to (further) extend the offer period.”

This joint announcement was required as per the Decree on Public Takeover Bids in connection with this offer, FedEx and TNT said.

As previously reported in LM, this is not the first time TNT has been featured in a deal with the prominent global parcel payer. In 2012, it was close to being acquired by FedEx' chief rival, UPS for $6.8 billion, but the deal was squashed, following a formal decision from the European Commission, the executive body of the European Union, which prohibited the acquisition. Many of the EC's concerns over the deal were due to the competitive parcel landscape in Europe.

The deal is expected to be made official during the first half of 2016, with FedEx agreeing to pay TNT $200 million in the form of a breakup fee should the deal not come to fruition. TNT and FedEx said that the European regional headquarters of the combined companies will be in Amsterdam/Hoofddorp, and that the TNT Express hub in Liege will be maintained as a significant operation of the group.

As for any antitrust issues that may arise from this deal, FedEx and TNT said that these concerns can be addressed in an adequate and timely manner.

In early April, when the offer was first announced, FedEx and TNT cited various strategic benefits of this deal, including: -the combined companies being a strong global competitor in the transportation and logistics industry, drawing on the considerable and complementary strengths of each other; -the combined companies' customers would enjoy access to a considerably enhanced, integrated global network, which would benefit from the combined strength of TNT Express strong European road platform and Liege hub and FedEx's strength in other regions globally, including North America and Asia. TNT Express customers would also benefit from access to the FedEx portfolio of solutions, including global air express, freight forwarding, contract logistics and surface transportation capabilities; and -FedEx will strengthen TNT Express with investment capacity, sector expertise and global scope, among others.

As part of the conditions of the deal, TNT Express' airline operations will be divested in compliance with applicable airline ownership regulations.

Jerry Hempstead, principal of Orlando, Fla.-based Hempstead Consulting, said in a recent interview that most observers have long anticipated the acquisition of TNT by FedEx, ever since UPS failed in its attempt to take over TNT.

“TNT has been trying to get itself sold for years ever since it split its mail group from its express group in 2010,” he noted. “Against the ever-expanding market shares of DHL, UPS and FedEx, TNT has struggled. They have done a great job in recovering from the loss of momentum, however, that was the result of the prolonged legal battle waged over the UPS offer. In the end I don't believe UPS fully understood the lobbying power DHL has with the EU that put a kibosh on the takeover based on anti competitive reasons.”

As for the prospects of a successful FedEx-TNT deal, he said the FedEx offer is far more likely to pass such scrutiny and will now put FedEx in a greater competitive position in Europe.

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