TNT rejects UPS advances
Reports out of Europe are stating that Netherlands-based TNT NV, a provider of mail and courier services and the fourth largest global parcel operator, rejected an offer by UPS for TNT’s express business.
Bloomberg reported that the unsolicited bid was for $6.43 billion ($4.89 billion euros), which is 42 percent above TNT’s stock price. The report said that this offer was turned down by TNT’s board, citing a company statement, which added that the companies still remain in discussions.
UPS officials confirmed in a statement that in February 11, following discussions with TNT, it made a revised, increased and comprehensive proposal to acquire the entire issued share capital of TNT for EUR9 per share in cash.
Like TNT, UPS confirmed that the discussions between the companies remain ongoing, although there is currently no certainty that any agreement will reached. UPS added that further details will be provided when appropriate.
These developments represent a change of heart for UPS to a degree. In December 2010, shortly after TNT first announced its plans to sell off its Express unit, it indicated it would not be a potential buyer of the unit.
UPS Chief Financial Officer Kurt Kuehn told a German newspaper, the Boersen-Zeitung, at that time that the UPS did not intend to make any large acquisitions in the future. But he did say that the company may be more inclined to focus on small and medium-sized acquisitions in Europe rather than buying TNT’s Express unit.
Using DPWN DHL as an example, Kuehn explained that expanding too quickly into a region—as DPWN DHL did when DHL Express acquired Airborne Express in 2003 to establish a U.S. domestic presence—can be dangerous. DHL Express eventually pulled out of domestic operations in the U.S., due to severe financial losses and facing myriad challenges keeping up with the more established and larger UPS and FedEx.
In December 2010, TNT announced its plans to it plans to “demerge” operations by separating its Express and Mail operations into two independent companies, effective January 2011. Company officials said that the main reasons for an internal separation were the increasingly divergent strategic profiles of the two units and the limited existing synergies between them.
In May 2011, TNT NV’s shareholders approved the spin-off of its Express unit. As a result of this initiative, TNT NV said it would demerge Express and only focus on Mail activities, and will retain a 29.9 percent financial stake to cover separation agreements, which will be returned to shareholders.
Industry pundits all agree that the deal is not dead yet and look forward to further developments to be announced.