FedEx takes next steps to complete its planned acquisition of TNT Express

FedEx recently took another step in its plans to acquire Netherlands-based TNT-NV and a provider of mail and courier services and the fourth largest global parcel operator for $4.8 billion, which it announced in early April.

The company said it has “submitted the required filing to the European Commission to obtain regulatory clearance in connection with the intended recommended public cash offer all issued and outstanding ordinary shares in the capital of TNT Express.”

And FedEx added that it expects to submit a request for review and approval of its Offer Document with the Netherlands Authority for the Financial Markets prior to June 30, which is required under Dutch law, adding that based on the required steps and subject to the necessary approvals, it expects the offer to close during the first half of 2016.

A Reuters report published earlier this week said that European Union antitrust regulators will rule by Aug. 3 whether to clear the FedEx bid for TNT.

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.

The deal is expected to be made official during the first half of 2016, with FedEx agreeing to pay TNT $200 million in the form of a breakup fee should the deal not come to fruition. 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.

As for any antitrust issues that may arise from this deal, FedEx and TNT said that these concerns can be addressed in an adequate and timely manner.

“We believe that this strategic acquisition will add significant value for FedEx shareowners, team members and customers around the globe,” said Frederick W. Smith, Chairman and CEO of FedEx, in a statement. “This transaction allows us to quickly broaden our portfolio of international transportation solutions to take advantage of market trends – especially the continuing growth of global e-commerce – and positions FedEx for greater long-term profitable growth.”

FedEx and TNT cited various strategic benefits of this deal, including:
-the combined companies being a strong global competitor in the transportation and logistics industry, drawing on the considerable and complementary strengths of each other;
-the combined companies’ customers would enjoy access to a considerably enhanced, integrated global network, which would benefit from the combined strength of TNT Express strong European road platform and Liege hub and FedEx’s strength in other regions globally, including North America and Asia. TNT Express customers would also benefit from access to the FedEx portfolio of solutions, including global air express, freight forwarding, contract logistics and surface transportation capabilities; and
-FedEx will strengthen TNT Express with investment capacity, sector expertise and global scope, among others

As part of the conditions of the deal, TNT Express’ airline operations will be divested in compliance with applicable airline ownership regulations.

A Wall Street Journal report explained that this deal makes sense on multiple reasons, given that the European delivery market is making steady gains due to continued expansion following the rollout of a single currency, and the ongoing proliferation of e-commerce, coupled with Europe being a hard market for foreign entities to get into, as many people live in inaccessible apartment buildings and each nation has its own rules and competitors.

And Dave Bronczek, FedEx Express president and CEO, said in the report that this deal can augment how FedEx operates in Europe, with TNT’s vast footrprint there, as well as FedEx hoping to leverage the increasing global reach of e-commerce.

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 TNT CEO Tex Gunning said on the company’s fourth quarter earnings call.

Jerry Hempstead, principal of Orlando, Fla.-based Hempstead Consulting, said earlier this year that most observers have long anticipated the acquisition of TNT by FedEx, ever since UPS failed in its attempt to take over TNT.

“TNT has been trying to get itself sold for years ever since it split its mail group from its express group in 2010,” he noted. “Against the ever-expanding market shares of DHL, UPS and FedEx, TNT has struggled. They have done a great job in recovering from the loss of momentum, however, that was the result of the prolonged legal battle waged over the UPS offer. In the end I don’t believe UPS fully understood the lobbying power DHL has with the EU that put a kibosh on the takeover based on anti competitive reasons.”