Home » Business » UPS’s general footprint to grow with TNT deal

UPS’s general footprint to grow with TNT deal

Mon Mar 19, 2012 3:23pm EDT

AMSTERDAM/NEW YORK (Reuters) – United Parcel Service Inc (UPS.N) will buy Dutch counterpart TNT Express (TNTE.AS) for 5.2 billion euros ($6.85 billion) to boost a position as a world’s largest package smoothness association outward a United States.

UPS will turn a marketplace personality in Europe and also benefit entrance to TNT’s stronger networks in a fast-growing Asian and Latin American markets, augmenting a U.S. company’s tellurian income to some-more than $60 billion (45 billion euros) from $53 billion in 2011 and withdrawal it with 477,000 employees.

“TNT Express fits into UPS’s long-term network plan,” UPS Chief Executive Scott Davis told investors. “This broadens UPS’s tellurian footprint.”

The understanding will enhance UPS’s income outward a United States to 36 percent of a total, from 26 percent today, and boost a participation in Brazil and Australia, executives said.

The partnership is a largest by distant in UPS’s 104-year history.

The pierce neatly widens a opening between UPS and No. 2 FedEx Corp (FDX.N), that has a marketplace share of about 3 percent in Europe.


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TNT pronounced on Monday a executive and supervisory play unanimously upheld UPS’s offer of 9.5 euros per share, a reward of scarcely 54 percent, adult from a bid of 9 euros per share final month.

“At a cost they’re paying, we’re not going to be jumping adult and down for it, though it’s not a bad understanding and it’s going to be a long-term positive,” pronounced Alan Lancz, boss of Alan B. Lancz Inc in Toledo, Ohio, that binds UPS shares. “It’s unchanging with what we design with government as distant as perplexing to enlarge out a tellurian scale and keep costs low.”

A deeper European mercantile unemployment than approaching could lifeless a benefits, he said.

“The downside would be a longer mercantile slack than what’s already approaching and a lot some-more malnutritioned liberation when liberation does occur,” Lancz said. “But we consider that’s semi-priced-in as distant as a squeeze price.”

TNT Express shares were adult 1.1 percent during 9.44 euros in European trade during 1635 GMT. UPS shares were adult 4.2 percent during $81.70, a six-year-high, in midafternoon trade on a New York Stock Exchange.

UPS will deposit 1 billion euros over a squeeze cost over a four-year duration to confederate TNT, and a association “intends to stay unequivocally high-quality on (credit) ratings,” Chief Financial Officer Kurt Kuehn told analysts.

The association expects clever European exports and is committed to investing in a segment notwithstanding tide mercantile concerns.

“Is it a time to be selling in Europe? It’s a flattering pale environment,” pronounced Jeffrey Kauffman, handling executive during Sterne Agee in New York. “Strategically, we wish to buy resources when things are cheap, not when you’ve got to compensate up, so strategically we consider this creates a lot of sense.”

Kauffman pronounced Europe will be a biggest income tide from a TNT merger, though a intensity footprint enlargement is global. “This unequivocally isn’t only an investment in Europe, it’s an investment in a Middle East, in Brazil, Australia, China — there’s so many some-more to this than Europe.”

Wall Street had been examination for a understanding after TNT in mid-February deserted UPS’s initial $6.45 billion (4.9 billion euro) bid. The companies remained in talks.

The bid from UPS came about 9 months after TNT separate from smoothness association PostNL, with shareholders pressuring TNT to shake adult a house and boost shareholder value.


The understanding has lifted concerns that smaller companies will find it harder to compete. Germany’s Deutsche Post DHL (DPWGn.DE), a closest opposition in Europe, pronounced a European Commission should inspect a due takeover thoroughly.

TNT’s biggest shareholder, PostNL (PTNL.AS), that owns a 29.8 percent stake, also pronounced it corroborated a offer, that UPS pronounced it would financial by a multiple of $3 billion in accessible money and new debt.

“The multiple of a dual companies … will be extended and unequivocally broach a tellurian personality that will be unequalled,” pronounced TNT Express conduct Marie-Christine Lombard.

With descending distinction and a bad opinion for 2012, TNT’s government had come underneath heated vigour from romantic shareholders, including Jana Partners and Alberta Investment Management Corp, to find a buyer.

“There will be a good grade of execution risk fundamental in a understanding of this distance and scope, with doing approaching over an approximately four-year time frame,” Morgan Keegan equity investigate analysts pronounced in a customer note. “That being said, we plan summation of $0.21 per share in 2013 and with these aloft projections a aim cost is augmenting to $124 from $116 per share and we say a outperform rating.”


UPS has enlarged looked during TNT as a approach to assistance it enhance in Europe, generally Britain, France and Germany. It pronounced it was assured a European antitrust watchdog would transparent a offer though endeavour a enlarged investigation.

Analysts pronounced a association competence need to sell some resources to safeguard a understanding wins approval.

“We design some divestments will be indispensable for a foe clearances,” DZ Bank researcher Robert Czerwensky said.

FedEx was viewed as a intensity swain during one point, and one that competence offer a aloft bid than UPS. But with reduction overlap, there were reduction resources to be gained in a TNT merger. And many analysts design FedEx to follow by on a settled concentration of expanding in Asia and presumably flourishing in Europe by shopping some resources divested in this merger.

“As a matter of policy, we do not criticism per corporate growth matters,” FedEx orator Jess Bunn said.

FedEx might plead a skeleton serve on Thursday after it reports third-quarter earnings.

UPS’s Davis pronounced it was “too early” to tell if European regulators would need a companies to sell off any operations though pronounced he expects a understanding to be approved.

“We’re utterly assured that all a required approvals will be obtained,” Davis said.

A orator for Deutsche Post pronounced a partnership would serve strengthen a energy of a poignant actor in a marketplace with singular participants.

Trade unions pronounced UPS had concluded to continue common labor agreements. The unions pronounced they had not listened of any skeleton for pursuit cuts, though analysts pronounced a understanding could impact thousands of employees.

“With TNT about dual times as vast as UPS in Europe, this could impact some-more than 20,000 jobs during TNT in Europe alone,” pronounced Kelper Capital Markets researcher Andre Mulder.

The businesses have overlap, though UPS’s Davis pronounced it was “way too early” to speak about pursuit cuts.

The understanding will move annual cost resources of 400 million to 550 million euros ($527 million to $724 million) in 4 years, UPS said. It pronounced it will initial spend a pretax $1.71 billion (1.3 billion euros) on “implementation costs” to grasp those synergies, adding that a understanding would boost UPS’s gain this year.

UPS expects a takeover to tighten in a third quarter. The partnership will be financed with an equal brew of money and debt, it said.

About two-thirds of TNT’s income is from European customers, though it also has been usually flourishing in China, India and Brazil, where it struggled to confederate a acquisitions.

UPS is in a midst of a $200 million enlargement of a perfume hub, and has recently grown by acquisitions.

The association carries about $11 billion in debt on a change piece and could daub credit lines for $12 billion in additional debt. The association has $4.1 billion in money and $1.3 billion in commercial securities.

($1 = 0.7592 euro)

(Additional stating by Scott Malone in Boston, Sophie Sassard in London, Matthias Inverardi and Roberta Cowan in Amsterdam; modifying by Anna Willard, John Wallace, Matthew Lewis and Bernard Orr)

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