FedEx acquisition of TNT nearly a done deal

The finish line is coming into focus for the $4.8 billion acquisition of TNT Express N.V. by FedEx.

Memphis-based FedEx said yesterday that it has unconditionally declared its offer for TNT, with 88.4 percent of all shares committed and a settlement date for the deal of next Wednesday, May 25 and all offer conditions having been satisfied or waived. 

“We are pleased with the outcome of the public share offer,” said David Bronczek, President and CEO, FedEx Express. “May 25, 2016 will be a profound moment in the history of these two great companies. Together, we will transform the global transportation industry, connecting even more people and possibilities around the world.”

This development follows a late April announcement from FedEx and TNT, stating that they received unconditional approval of the offer from the Ministry of Commerce People’s Republic of China (MOCFCOM).

And that followed a January announcement that they obtained the unconditional approval of the EC and the EC concluding this deal does not raise any competition concerns. Approval for the deal was previously granted by Brazil and the United States.

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.

In November, FedEx officials said the meshing of FedEx and TNT Express presents a highly pro-competitive proposition for the provision of small package delivery services within and outside Europe.

They added that the networks of TNT Express and FedEx are largely complementary, given that FedEx’s strength is providing U.S. domestic and extra-EEA international services, while TNT Express’ focus is on providing intra-European services while also noting that the Combination would allow the parties to sell a more competitive e-commerce offering in the market, which should benefit consumers and SMEs in Europe and beyond.

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.

TNT has grown into a highly respected $6.680 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. The company 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 nearly 80,000 employees. In 2014, it kicked off new productivity and efficiency plans, which included a restructuring of its management team and investments into its people, processes, IT systems and institutional competencies, whilst facing stiff competition and adverse trading conditions, particularly in Western Europe.

The approval of China was the “last piece of the puzzle” that’s required for FedEx to buy all of TNT, excluding the aircraft which are being spun off because of foreign flag carrier rules (just as Airborne spun off its aircraft in order to be acquired by DHL here in this country in 2003), according to Jerry Hempstead, president of Hempstead Consulting.
“The EU approval and Brazil (including the successful decision for FedEx after the UPS legal challenge) are already in hand,” he explained. “FedEx has asserted for some time that the TNT deal was progressing and would close in the first half of this year, so having this last piece taken care of they can move fairly quickly to get it done. This is a good deal, because I believe it ensures the survival of TNT as it has struggled for years against DHL, UPS and FedEx. It will be, I suspect, in the long term, bad for shippers, because it takes a major player out of the bidding dynamic.”

And he added that neither DHL nor UPS wanted this deal to happen but had it not happened TNT would have continued to struggle. What’s more, he explained that it gives FedEx much more of a European presence where it has long held a distant fourth position.

After winning approvals in the US (Nov 2015), EU (Jan 2016) and Brazil (Feb 2016), China was the last major regulatory hurdle for FedEx to gain in its acquisition of TNT Express, with many pundits concerned that China could drag out the process with a lengthy review, this announcement proves those concerns unfounded, noted Rob Martinez, president of Shipware LLC.

“The announcement is a blow to UPS, which unsuccessfully sought approvals to buy TNT a few years ago, and since has lobbied hard against the merger,” he said. “To date, UPS’s appeals have failed, and in our view, is best advised to modify their strategy and focus on ways to position itself in the market against the merged entity. Shipware has long held the position that the pending merger is good for FedEx, it’s good for TNT, and it’s good for consumers as it creates a true, third player to complete in the European market.”