FedEx to buy TNT Express for $6.5b
FEDEX said it will buy Dutch package delivery firm TNT Express for 4.4 billion euros (S$6.5 billion), aiming to take on bigger rivals United Parcel Service (UPS) and Deutsche Post in Europe.
European regulators blocked a 2013 takeover of TNT by UPS due to concerns that it would stifle competition, but analysts and executives said yesterday that FedEx, with its strong air fleet, would complement TNT's expansive European road network.
"This (acquisition) will dramatically lower our cost to serve European markets," said Patrick Fitzgerald, FedEx communications vice-president.
ING analysts estimated that Deutsche Post's DHL currently has a 19 per cent market share in Europe, followed by UPS with 16 per cent, TNT with 12 per cent and FedEx at five per cent - meaning the deal would catapult FedEx to second place.
UPS is fighting the decision by European regulators to block its 2013 bid for TNT, but has said it will not re-bid for TNT regardless of the outcome. In a note to clients, ABN Amro wrote that UPS had said it wanted to make sure no precedent was set by the European Union decision.
A rival bid from Deutsche Post was unlikely because it would risk hitting the 30 per cent European market share ceiling UPS ran into, said Kepler Cheuvreux analyst Andre Mulder. "FedEx made a smart move and their rivals can do virtually nothing," he added.
FedEx's decision to bid followed a 17 per cent drop in TNT shares over the past year, versus a 21 per cent rise in the benchmark Dutch AEX index.