CEP union of giants fails - EU calls off UPS and TNT merger
The US parcel and logistics corporation UPS has cancelled its plans to take over its Dutch CEP rival TNT Express and retracted its takeover bid, on account of continued significant objections from the EU’s directorate general for competition. TNT Express will receive EUR 200 million in compensation from UPS for cancelling the transaction.
It was supposed to be the largest acquisition in the 106-year history of UPS. Since the largest parcel delivery service worldwide retracted its billion-euro purchase offer for its competitor TNT Express, however, one of the largest takeovers in the history of the logistics industry has suddenly collapsed. The EU commission’s concerns regarding the competitive effects of the
move form the background for the failed transaction.
Several times last year the cartel authorities of the European Union had voiced their concern that this gigantic merger could result in the newly-joined UPS / TNT parcel corporation dominating the market to too great an extent in many European countries.
From the start, the commission required extensive concessions from the companies. UPS then offered to sell some of its parcel services, among other things. But after a meeting with the competition authorities early in January, UPS no longer thought a definitive takeover would be possible.
The company also ruled out any further concessions. According to UPS, it will now pay TNT Express approximately EUR 200 million for the collapse of the agreement. The corporations agreed on that sum last year.
A huge disappointment
«We are disappointed by the stance of the EU commission,» Scott Davis, head of the board of directors of UPS, stated in an initial comment. His company offered EU competition authorities «important concessions» to dispel the many concerns of the cartel authorities, he said.
UPS will offer a more detailed statement once the EU commission formally decides to ban the deal. This decision is expected to be taken shortly. UPS does intend to grow, however, even without TNT Express, Davis clarified. The corporation has the financial strength to take advantage of opportunities which may arise in future, he said.
TNT Express share price drops
TNT Express also expressed disappointment in an initial reaction to the failed takeover. The plans had recently distracted TNT Express’ management from its tasks, the company said. The Dutch service provider said that its highest management level would now once again be able to devote its attention to its core tasks.
New measures to increase profitability have not only been thought of, but are necessary, the company based in Hofddorp continued. At the stock exchange the news caused the prices of TNT Express securities to collapse dramatically. The company’s shares dropped by 49% shortly after the start of trading. Shares in competitor Deutsche Post DHL, in contrast, barely reacted.
DHL has the last laugh
«Big Brown», as UPS is sometimes called based on its brand colour, wanted to purchase the Dutch competitor for a total of EUR 5.16 billion, so that it could gain a better foothold in the European CEP market. If the takeover of TNT Express had been implemented, the brown giant would not only have caught up with its strongest competitor DHL in one fell swoop (the latter has a market share of 19% in Europe), but the former, with a 20% presence in the market, would even have slightly overtaken DHL.
Would, could, if, but – the largest beneficiary of the called-off giant merger is definitely Deutsche Post DHL which, as undisputed market leader in Europe, has the last laugh and can now look very calmly to the future.
EU always had many concerns
The EU competition authorities already started a close examination of the huge acquisition in July 2012, due to grave reservations about the deal, which would have cost billions of euros, and repeatedly voiced its concerns about the merger thereafter.
The EU’s competition commissioner Joaquín Almunia said at the time that «the planned takeover could limit competition, especially to provide the fastest courier services at the expense of direct customers – and thus ultimately at the cost of European consumers.»