FedEx Officially Acquires TNT Express in $4.8B Deal

The $4.8 billion acquisition of Netherlands-based TNT Express-NV, a provider of mail and courier services and the fourth largest global parcel operator, by transportation and logistics services provider FedEx was made official today.

This announcement followed FedEx previous announcement that it unconditionally declared its offer for TNT, with 88.4 percent of all shares committed and a settlement date for the deal of Wednesday, May 25 and all offer conditions having been satisfied or waived.

“This acquisition is a significant accomplishment and marks the beginning of a new era, filled with promise for our people, customers and shareowners,” said Frederick W. Smith, Chairman and CEO of FedEx, in a statement. “The timing of this historic event is important, particularly in the current market environment where global e-commerce is growing at double-digit rates. Adding TNT’s capabilities to our existing world-class suite of services, including GENCO and the recently relaunched FedEx CrossBorder, will further expand the ability of FedEx to support business connections around the world.”

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. And Fedex being a distant fourth in Europe in terms of market share made attempts to stop the sale difficult. TNT had been looking for a buyer of its express business since 2010, when it split out its mail division.

In February, TNT said it planned to sell its airline operations to ASL Aviation Group to ensure it cleared European regulatory restrictions on airline ownership in order to move forward with this deal. That sale was made official earlier this week.

“I expect TNT to now lease back the aircraft for some period of time until FedEx and TNT can integrate their volumes onto one unified network,” said Jerry Hempstead, president of Hempstead Consulting. “There will be some bumps along the way as the integration teams rationalize pick up and delivery routes, eliminate redundant terminals, introduce the FedEx tracking and tracing, billing and collections, and customer service. I have every expectation that FedEx will make the investment meld quickly and efficiently and not duplicate the disaster of the parallel acquisition of Airborne in the USA by DHL that was consummated in 2003. DHL was forced to shutter the USA domestic business in January of 2009.”

Hempstead added that in the short term FedEx may empower the sales force to go after new volumes to fill excess capacity, while, unfortunately for shippers, he noted this deal removes another major player from the negotiating table.

In November, FedEx said 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.

Shipware LLC President Rob Martinez said this deal is a blow to UPS, who has lobbied hard against this deal.

“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,” he said. “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.”