Europe vetoes UPS-TNT merger
UPS is pulling out of its planned €5.2 billion ($6.9 billion) bid for TNT Express following an indication from the European Commission that it would rule against the deal. The Commission is not due to announce the formal outcome of its antitrust investigation until February 5, but in the curious parlance of the European Union, advised both companies that it was “working on a decision” to prohibit the acquisition.
The thumbs-down represents a serious blow to UPS’s aspirations in Europe. The company had wanted not only to benefit from TNT’s regional network, but also to tap into its Dutch-headquartered rival’s business in the rapidly expanding markets of Asia and Latin America.
In earlier efforts to overcome competition issues and clear the way for a deal, UPS offered to sell certain key assets in Europe to French parcel group DPD, and provide space on its aircraft. When that complex proposal fell apart, UPS negotiated with FedEx on the possibility of giving up some of the operations in 15 countries, primarily in eastern Europe, that it would have acquired with TNT. However, FedEx made clear in recent days that it wanted more than UPS was offering.
The Commission may already have reached the conclusion by this time that a takeover by UPS would have restricted consumer choice by leaving those parts of Europe where FedEx lacks a strong presence effectively in the hands of just the UPS-TNT combine and DHL.
In a statement, Scott Davis, UPS chairman and chief executive, expressed his disappointment at the decision after nine months in pursuit of TNT. “We proposed significant and tangible remedies designed to address the EC’s concerns with the transaction. The combined company would have been transformative for the logistics industry, bringing meaningful benefits to consumers and customers around the world, while supporting growth in Europe in particular.”
During more than 20 years in its role as a competition regulator, the EC has blocked only around 20 acquisition deals. This is thought to be the one of the largest.
UPS will pay TNT compensation of €200 million as a result of withdrawing its bid, and acknowledged that the merger process, which began in March 2012, had been a “distraction” for TNT’s management.
TNT shares plunged on news of the ruling. The company has been struggling in a weak European market, and lost its chief executive shortly after UPS announced its intentions. Bernard Bot, acting chief executive, said TNT Express would announce details of a strategic review soon. The company’s sale of its airline to ASL Aviation, a condition for approval of the merger, will not go ahead.
TNT Express said in a statement: “TNT Express regrets this situation, having believed the merger was feasible and beneficial for all stakeholders.”