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FedEx Agrees to Acquire TNT Express in $4.8 Billion Deal FedEx Agrees to Acquire TNT Express in $4.8 Billion Deal
(about 9 hours later)
LONDON — The FedEx Corporation said on Tuesday that it had agreed to acquire the Dutch delivery company TNT Express in a $4.8 billion deal that would greatly expand the American delivery giant’s presence in Europe. LONDON — Taking advantage of a strong dollar and seeking to succeed where United Parcel Service stumbled, the FedEx Corporation has agreed to acquire the Dutch delivery company TNT Express in a $4.8 billion deal.
The all-cash deal would give FedEx access to TNT’s extensive road delivery network and create what the companies said would be a third strong player to compete in Europe with DHL Express of Germany and United Parcel Service. The all-cash deal announced on Tuesday would greatly expand FedEx’s presence in Europe, where it has sought to compete with DHL Express of Germany and UPS, its principal American rival. With the acquisition FedEx would get access to TNT’s extensive road delivery network.
The deal comes less than two years after European regulators blocked a bid for TNT by UPS over concerns that it would decrease competition and increase prices. The deal comes two years after European regulators blocked a bid for TNT by UPS over concerns that it would decrease competition and increase prices.
But because FedEx has a smaller European operation and the deal would create a stronger rival to DHL and UPS, which together control about two-thirds of the European express delivery market, the smaller companies said they were confident their deal would pass antitrust muster. But FedEx and TNT were confident that their deal would pass antitrust muster. A combination would create a stronger rival to DHL and UPS, which together control about two-thirds of the European express delivery market.
FedEx would pay 8 euros a share in cash for each outstanding share of TNT, a 33 percent premium to the stock’s closing price on Thursday, the last day it was traded before the Easter holiday in Europe. The offer values TNT at about €4.4 billion, or about $4.8 billion. And the FedEx deal is “much simpler” than the previously proposed UPS transaction, as there is much less overlap between the two companies, said Antony Burgmans, TNT’s chairman.
David J. Bronczek, the president and chief executive of FedEx Express, the company’s main operating unit, said FedEx thought that it was a good time to buy TNT because the dollar has remained strong against the euro and because the European economy is improving. He also noted that buying TNT gave FedEx access to an existing road delivery network, including 550 hubs and depots, that would be much more costly for FedEx to build on its own. “We are far more complementary than what was the case with UPS. This means that the synergies will be less,” he said at a news conference. “But, on the other hand, the strategic fit is better.”
FedEx shares rose 3.5 percent to $172.42 in early trading in New York on Tuesday. Shares of TNT jumped 30 percent, to €7.80, in afternoon trading in Amsterdam. As part of the transaction, TNT has agreed to sell its airline operations, including its cargo services, because the European Commission restricts foreign ownership of airlines in Europe.
Frederick W. Smith, the FedEx chairman and chief executive, said in a news release that the transaction would allow the company “to take advantage of market trends — especially the continuing growth of global e-commerce — and positions FedEx for greater long-term profitable growth.” Under the terms of the deal, FedEx will pay 8 euros a share in cash for each outstanding share of TNT, a 33 percent premium to the stock’s closing price on Thursday, the last day it was traded before the Easter holiday in Europe. The offer values TNT at about €4.4 billion, or about $4.8 billion.
Since UPS withdrew its offer for TNT in January 2013, the value of the euro has declined more than 19 percent in value against the dollar.
On Tuesday, FedEx executives cited the strong dollar, as well as signs of improvement in Europe, as among the reasons for the deal.
“The European economy appears to be growing a bit, fueled, no pun intended, by the lower price of oil and the quantitative easing that has been announced by the E.C.B.,” said Fred Smith, FedEx’s founder and chief executive.
David J. Bronczek, the president and chief executive of FedEx Express, the company’s main operating unit, also noted that buying TNT gave FedEx access to an existing road delivery network, including 550 hubs and depots, that would be much more costly for FedEx to build on its own.
TNT’s executive and supervisory boards have unanimously recommended that shareholders accept the deal, which is expected to close in the first half of 2016. PostNL, the Dutch mail service that owns 14.7 percent of TNT, has agreed to support the deal.TNT’s executive and supervisory boards have unanimously recommended that shareholders accept the deal, which is expected to close in the first half of 2016. PostNL, the Dutch mail service that owns 14.7 percent of TNT, has agreed to support the deal.
UPS dropped its $6.9 billion bid for TNT in 2013 after the European Commission, the European Union’s antitrust regulator, blocked the deal, concerned that it would limit choice for European shipping customers and lead to price increases.UPS dropped its $6.9 billion bid for TNT in 2013 after the European Commission, the European Union’s antitrust regulator, blocked the deal, concerned that it would limit choice for European shipping customers and lead to price increases.
“We know that there are two strong players in the marketplace. Now, there will be three,” Mr. Bronczek said at a news conference in Amsterdam on Tuesday. “At the end of the day, what the commission and what the regulatory authorities would like to see is better competition.” “We know that there are two strong players in the marketplace. Now there will be three,” Mr. Bronczek said at the news conference in Amsterdam on Tuesday. “At the end of the day, what the commission and what the regulatory authorities would like to see is better competition.”
The FedEx deal is “much simpler” than the previously proposed UPS transaction, as there is much less overlap between the two companies, said Antony Burgmans, the TNT chairman.
“We are far more complementary than what was the case with UPS. This means that the synergies will be less,” Mr. Burgmans said at the news conference. “But, on the other hand, the strategic fit is better.”
As part of the transaction, TNT has agreed to sell its airline operations, including its cargo services, because the European Commission restricts foreign ownership of airlines in Europe.
Mr. Burgmans said that the companies, in part because of the much simpler deal structure, were “as certain as can be in life that this deal will close in Brussels.”
In 2013, DHL had a 41 percent market share in the European international express market, according to data on DHL’s website, which also shows that UPS had a 25 percent market share. TNT accounted for 12 percent of the market, and FedEx accounted for 10 percent.In 2013, DHL had a 41 percent market share in the European international express market, according to data on DHL’s website, which also shows that UPS had a 25 percent market share. TNT accounted for 12 percent of the market, and FedEx accounted for 10 percent.
FedEx, which has been operating in Europe for about 30 years, had about 210 million shipments into and out of Europe last year and provides next-day service to about 86 percent of the market, Mr. Bronczek said.FedEx, which has been operating in Europe for about 30 years, had about 210 million shipments into and out of Europe last year and provides next-day service to about 86 percent of the market, Mr. Bronczek said.
“You now have two strong competitors and two weak competitors,” Mr. Burgmans said. “Now you have three very large ones who will fight very hard for the favor of the customers. In the end, I think that will be a better quality offering.” “You now have two strong competitors and two weak competitors,” Mr. Burgmans said. “Now you have three very large ones who will fight very hard for the favor of the customers. In the end, I think that will be a better-quality offering.”
Founded in 1946, TNT, based in Hoofddorp, the Netherlands, delivers documents, packages and freight to more than 200 countries, according to its website. It has 65,000 employees and posted revenue of €6.7 billion in 2013. It handles about one million shipments a day. Founded in 1946, TNT, based in Hoofddorp, the Netherlands, delivers documents, packages and freight to more than 200 countries and territories, according to its website. It has 65,000 employees and posted revenue of €6.7 billion in 2013. It handles about one million shipments a day.
After the deal, FedEx will select three new members of the TNT supervisory board. FedEx also expects that Mr. Gunning and Maarten de Vries, its chief financial officer, will remain members of TNT’s executive board.
FedEx said that it intended to finance the offer through cash as well as existing and new debt. The agreement includes a €200 million breakup fee.FedEx said that it intended to finance the offer through cash as well as existing and new debt. The agreement includes a €200 million breakup fee.
Based in Memphis, FedEx is one of the world’s largest providers of delivery services. The company posted revenue of $45.6 billion in 2014 and has more than 300,000 employees. It handles more than 10.5 million shipments a day.Based in Memphis, FedEx is one of the world’s largest providers of delivery services. The company posted revenue of $45.6 billion in 2014 and has more than 300,000 employees. It handles more than 10.5 million shipments a day.
FedEx is being advised by JPMorgan Chase and the law firms NautaDutilh and Baker & McKenzie, while TNT is being advised by Goldman Sachs, Lazard and the law firm Allen & Overy.FedEx is being advised by JPMorgan Chase and the law firms NautaDutilh and Baker & McKenzie, while TNT is being advised by Goldman Sachs, Lazard and the law firm Allen & Overy.