FedEx Faces EU Probe into TNT Take Over Bid

As reported by Bloomberg, FedEx Corp. faces an in-depth probe into its bid to take over TNT Express NV just two and a half years after European Union regulators thwarted United Parcel Service Inc.’s attempt to buy the Dutch company.

The FedEx-TNT tie up may cut competition in the market for small packages and lead to higher prices, the European Commission, the EU’s executive arm, said on Friday.

The EU “said all along they were going to leave no stone unturned. How could they not do an in-depth review when they rejected the UPS-TNT merger?” said Kevin Sterling, an analyst with BB&T Capital Markets, who recommends holding FedEx shares. “Think of the scrutiny they gave UPS-TNT. They have to do this. They absolutely have to.”

The agreement to acquire the Dutch company for $4.8 billion, would allow Memphis, Tennessee-based FedEx, currently No. 4 in the European market, to add vehicles, staff and customers. Those assets may help FedEx cut costs and expand its reach to take on Deutsche Post AG’s DHL and UPS.

The Brussels-based commission said the deal may leave DHL and UPS as the only rival “integrators” that control a large air and road delivery network in Europe.

“These are two very complimentary networks. If anything, it helps improve competition in Europe rather than reduce competition,” said Jack Atkins, an analyst with Stephens Inc., who rates FedEx overweight.

“Ultimately this is going to be a transaction that will gain approval. But I’d expect, and we’re seeing, regulators in Europe taking a very close look at this.”

Suitable Buyer
UPS aborted its own bid for TNT in January 2013 after the EU signaled it would block the deal. Regulators argued it would limit some shipping customers’ choices for next-day deliveries to just UPS and DHL. UPS failed to find a suitable buyer for parts of TNT to ensure that competition for delivery services wouldn’t be squelched.

“We will continue to work together with TNT Express to meet the European Commission’s need for additional due diligence and are confident that the combination of both companies will increase competition and create benefits for customers,” Patrick Fitzgerald, a spokesman for FedEx, said in a statement.

“We continue to make progress on all of the necessary regulatory steps around the world that would allow us to complete the transaction in the first half of 2016.”

TNT will continue to cooperate with FedEx and the commission, the Hoofddorp, Netherlands-based company said in an e-mailed statement. As indicated in April, “FedEx and TNT expect the transaction to close in the first half of 2016.”

December Deadline
TNT shares dipped as much as 1.6 percent in Amsterdam trading. FedEx advanced by as much as 0.7 percent in New York.

The commission set a Dec. 8 deadline to rule on the FedEx-TNT deal.

“Many businesses, and in particular e-commerce, rely heavily on affordable and reliable small package delivery services,” Margrethe Vestager, the EU antitrust commissioner, said in a statement.

Regulators need to “make sure that FedEx’s takeover of TNT would not impede effective competition and would not lead to higher prices for consumers,” she said.

Source: BloombergBusiness

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