United Parcel Service, Inc. (UPS) has abandoned its $6.9-billion (€5.2-billion) attempt to acquire Amsterdam-based TNT Express NV (TNTE). The Dutch firm is the second-largest package delivery firm in Europe and also has operations in emerging markets.
UPS initiated the bid last March to better compete in Europe with the continent’s largest-package delivery operation, Deutsche Post’s DHL. UPS wanted to buy TNTE both for its European network and its assets in Asia and Latin America, Reuters reported.
UPS announced yesterday that the European Commission (EC) had “informed UPS and TNTE that it is “working on a decision to prohibit the proposed acquisition of TNTE” as it determined the takeover would make the business sector less competitive by reducing the number of players serving it.
TNTE stated that on January 11, it and UPS “met with EC’s case team investigating the proposed acquisition… The case team informed the companies that on the basis of UPS’s current remedy proposal it is working towards proposing a prohibition decision.”
Responding to the EC’s concern, UPS had offered to sell parts of the company’s small package operations and airline assets, as reported by the Associated Press.
Rival firms FedEx and DHL had both lobbied the EC to stop the takeover, a banking source told Reuters. However, UPS and TNTE failed to secure buyers and the planned asset sales were not enough to satisfy European Union officials.
“One of the key sticking points to the proposed UPS/TNTE deal falling through was that UPS/TNTE were not able to find a buyer for certain assets that needed to be sold off in order to meet the EC's competition requirements,” pointed out analyst Peter Nesvold of Jefferies & Co. He also said that “UPS, the most likely buyer of those assets, did not get involved and indirectly helped the deal fall through.”
Although UPS must pay TNTE a $265.5-million (€200-million) termination fee, the European firm remains on shaky ground. The news caused to its share price to fall at one point yesterday by 50% before closing 42% lower.
In a statement, TNTE said it “regrets this situation, having believed the merger was feasible and beneficial for all stakeholders.” The company also said the “protracted merger process has been a distraction for management” and that “management will provide an update on its strategy in due course.”
“We are extremely disappointed with the European Commission’s position,” said UPS CEO D. Scott Davis in a statement. “We proposed significant and tangible remedies designed to address the European Commission’s concerns with the transaction.
“The combined company would have been transformative for the logistics industry, bringing meaningful benefits to consumers and customers around the world, while supporting growth in Europe in particular,” Davis added.
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