TNT Becomes FedEx’s Easter Present

Memphis-based FedEx reported this Tuesday morning that it would buy its Dutch competitor TNT Express for €4.4 billion thus strengthening its position in Europe where it traditionally trails market leader DHL of Deutsche Post and its U.S. arch rival UPS. "The companies reached conditional agreement on a recommended all-cash public offer of 8 euros per ordinary TNT Express share," a joint statement said, with the suggested price representing a premium of 33 percent over what the share cost on average after trading closed on April 2, prior to the Easter days. The bid is 33 percent above TNT's last closing price, although below UPS's 2013 offer of 9.5 euros a share.
There were no objections to the deal by TNT Express' largest shareholder, Dutch mail service PostNL, which owns a 14.7 percent stake in the company.

TNT’s market share shrank constantly
Loss-making TNT fell in FedEx’s lap like a somehow sour but ripe fruit that was in need for a strong partner assuring the Amsterdam-headquartered firm’s further survival. In an attempt to stay afloat, TNT had constantly cut costs, sold operations and invested in its road network in its attempt to secure its market share and keep most of its customers on board in spite of the weak European business environment which package delivery firms are facing since years. 
"Our customers can profit from the true global reach and expanded propositions, while with this offer our shareholders can already reap benefits today that otherwise would only have been available in the longer run," TNT Express chief Tex Gunning said in a statement. The manager noted that his firm would sell its airline operations in compliance with European airline ownership regulations. This and all other possible anti-trust concerns would be addressed in due course, Gunning stated while adding that both firms planned to shape the merger without any significant job losses.

Uncertainty in Liege
What consequences this might have for TNT’s gateway Liege airport located in the Walloon part of Belgium, where the integrator’s freighter fleet is based, remains to be seen. Evidence suggests that once the merger is fully accomplished air transport of express shipments will be concentrated in Paris CDG, FedEx’s European hub.
“We believe that this strategic acquisition will add significant value for FedEx share owners, team members and customers around the globe. This transaction allows us to quickly broaden our portfolio of international transportation solutions to take advantage of market trends," chairman and chief executive of FedEx Frederick Smith, said in Tuesday’s release. 
The intended tie-up of the package delivery companies did not come totally unexpected, although the date of the deal’s announcement was one of the best kept industrial secrets.

No opposition expected from EU regulators
Reuters quotes analyst Andre Mulder of Kepler Chevreux who speaks of a “fair FedEx offer in view of TNT’s weaker market position." A rival bid from a competitor such as Deutsche Post was unlikely because it would risk hitting the 30 percent European market share ceiling UPS ran into, Mulder stated. United Parcel Service’s attempt to take over TNT two years ago failed when its bid was blocked by EU competition watchdogs. Hence, both FedEx and TNT emphasized on Tuesday that they did not expect significant opposition from regulators. Unlike FedEx, UPS already had a strong European network when it bid for TNT.
FedEx has just 2 percent of the European market and almost no overlap with TNT, which has about 15 percent, the analyst said. "FedEx made a smart move and their rivals can do virtually nothing."
TNT stock leapt more than 30 percent on Tuesday towards FedEx's bid price.

Heiner Siegmund