UPS executives said today that they still expect the EUR 5.16bn acquisition of rivals TNT Express to go ahead early in 2013, despite receiving a Statement of Objections from the European Commission.
Atlanta-based UPS has been offering EUR 9.50 per share for its Netherlands-based rival since March, but the European Union’s executive branch launched an in-depth “phase two” investigation into the deal in July.
After multiple suspensions of the investigation for the Commission to be sent additional information, the most recent provisional deadline given by Brussels for completion of its review was 15th January, 2013.
But this week UPS and TNT Express were sent a Statement of Objections (SO) by the Commission.
The SO document is confidential, but follows on from public comments by the Commission to the effect that it is concerned about the share of the European express market that a combined UPS-TNT would have if the merger went ahead.
Commission officials have suggested they are concerned about the level of competition available for small businesses in Europe requiring express delivery with the loss of one of the big four global integrators.
Today as they were discussing the UPS third quarter results with analysts, the US company’s executives were keen to portray the SO as a normal part of the EU competition review process for a major acquisition.
They said they still expected the deal to be approved and concluded “in early 2013″.
Kurt Kuehn, the UPS chief financial officer said: “It’s a complex transaction and whenever we get to phase two we spend a lot of time with the Commission. We’ve got a way to go. We’ve just got the S.O., so we will be looking over that for the next couple of weeks or so.”
Statement of Objections
The European Commission, which has not publicly revealed the details of its SO, says a Statement of Objections is a formal step in its antitrust investigations process that informs parties concerned about the objections being raised against them.
Once the SO is issued, companies can reply to the document in writing, or request an oral hearing to present its arguments in the case.
The Commission would then take a decision on whether the concerns expressed in the SO mean the deal complies with the European Union’s competition rules.
Dan Brutto, the president of UPS International said today that the phase 2 investigation process was complex because the state of the market in all 27 European Union members had to be assessed.
But he insisted that UPS was working “constructively” with the Commission on getting the approval.
“The good news is the teams have an open dialogue with the Commission and we are going to turn in all the documents required into the European Commission,” he said.
Scott Davis, the UPS chairman and CEO, added: “We are confident that we will get clearance and we will get it early in 2013.”
UPS is currently believed to have a share of about 23% in the European express delivery market, with TNT’s market share about 14% as of 2011.
Even combined, the two companies would not surpass DHL’s 41% share of the European express market, but the combined company would be some distance in front of FedEx Express, which has a market share of around 10% in Europe.
UPS has predicted that joining with TNT Express, its total global revenue would be around EUR 45bn ($60bn USD) a year, compared to the EUR 53bn annual revenue at Deutsche Post DHL and EUR 33.2bn ($43bn) at FedEx.