UPS’s bid to acquire Netherlands-based TNT NV Put on Hold

A recent Bloomberg report stated that European Union (EU) regulators have extended their review of UPS’s bid to acquire Netherlands-based TNT NV, a provider of mail and courier services and the fourth largest global parcel operator for $6.28 billion by ten working days until December 12.

According to the report, the EU did not specify the reason for the delay which was signaled in an online filing on July 27. It added that the time limit for regulatory review of deals can be prolonged at the request of companies.

On June 22, UPS commenced an offer period for the acquisition that was slated to run through August 31. But in mid-July UPS said that the European Commission’s review of the proposed acquisition is now expected to move to a “Phase II review,” because there are facets of the deal that require more time to analyze.

UPS officials said a Phase II investigation can take up to 25 weeks to complete, adding that it is likely the offer condition relating to competition clearance will not be satisfied by the end of the initial offer period. Because of this, the company said it now expects the deal to be completed during the fourth quarter of this year.

UPS and TNT said that this “transaction will create a global leader in the logistics industry with more than $60 billion in annual revenues and an enhanced, integrated global network.”

As previously reported, the joint synergies expected to result from this deal, according to UPS and TNT include:
-the complementary strengths of both organizations creating a customer-focused global platform that will be a leader in transportation technology and customer service;
-TNT Express customers benefiting from UPS’s unparalleled access to the North American market as well as access to its logistics solutions, such as global freight forwarding and distribution capabilities; and
-UPS customers will benefit from access to expanded express and road freight capabilities in Europe and broader capabilities in fast-growing regions such as Asia-Pacific and Latin America.

“We intend to leverage the strengths of both companies to enhance the combined growth portfolio and believe all stakeholders will benefit,” said UPS Chairman and CEO Scott Davis on an investor call in March. “UPS possesses a large U.S. presence, as well as experience in global supply chain management. TNT Express provides additional small package access points in Europe, the most extensive European express road network, and an expanding presence in emerging markets.”

Over the years, TNT has grown into a highly respected $7.25 billion euro company with diverse revenue streams from around the world with operations in more than 200 countries in Europe, the Middle East, Asia Pacific and Latin America, said UPS CFO Kurt Kuehn on the March investor call. And he added TNT has a substantial group of assets, including aircraft, vehicles, hubs, and depots, which cumulatively account for about 1 million deliveries per day handled by its 77,000 employees. IN 2011, TNT had a net loss of $270 million euro and $7.2 billion euro in revenue.

And according to UPS estimates about 23 percent of TNT Express’s Europe revenues are from its express road freight operations, which Kuehn described as an important and vital part of its business and a real differentiator.

TNT’s second quarter earnings were strong, with the company posting a 67 percent annual increase in operating profit to $94.7 million (U.S.) and sales up 1.7 percent to $2.25 billion.