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UPS “getting back into gear” after TNT deal collapse

Thursday, January 31st, 2013

UPS executives said today that the company will now be “getting back into gear” following the long distraction of the ultimately fruitless attempt to buy rival integrator TNT Express.

The company had its proposed EUR 5.2bn offer for the Netherlands-based firm blocked by the EU Commission earlier this week, as a result of concerns about the deal’s impact on competition in the European express packages market.

Discussing latest financial results today, UPS executives said that some of the $8bn in cash the company set aside to buy TNT will now be used to step up share buybacks, but there are also plans to swing into action with growth initiatives that were put on hold while the Atlanta-based company got to grips with what would have been the largest acquisition in its history.

“The biggest impact from our TNT deal is that we put a lot of initiatives on hold,” said UPS International president Dan Brutto told analysts today.

“We were focussed on that a lot, but we’ll be kicking back into gear with some of the growth strategies now.”

Brutto said the company saw a lot of opportunity to expand in Europe, particularly Eastern Europe, and develop its business-to-business supply chain capabilities there, such as in the lucrative healthcare segment.

“For the most part, we can provide the service. I think TNT would have helped us get there faster, but there are still all kinds of opportunities for us – right now just in healthcare in Europe, we’re working to help UPS customers get their supply chain moving end-to-end.”

With the company’s International results in 2012 relatively flat, UPS is keen to get moving again following the distraction of the TNT deal. A “large team” of staff that had been dedicated to preparing for the potential merger with TNT will now be moving back to support other UPS initiatives.

Expanding the international network is among the priorities, in forwarding and supply chain work, but business-to-consumer opportunities are also centre stage, with UPS shortly to announce the expansion of its European parcel shop network, Kiala, into the UK.

Executives said in terms of export growth, Germany and Italy had also shown promise in 2012, along with the UK.

UPS chairman and CEO Scott Davis said today that the economy is more stable in Europe than last year, boding well for 2013, with global trade starting to pick up. Increased consumer power in Asia, from more people wanting to buy European products could also help.

Davis said UPS will also be getting back into share buy backs, having held off in the run-up to the TNT Deal, which has taken more than 11 months of the company’s time. “We will keep a balanced use of cash going forward,” he said. “We’ll reinvest in the business. We think there’s opportunities in emerging markets and in healthcare.

“We’re always looking for opportunities. There won’t be opportunities like TNT, but there will be other opportunities.”

One issue of concern for the international network has been the shift of customer demand from premium to economy products, particularly within Asia where some premium customers have moved down as far as ocean transport.

UPS is hoping its new worldwide express freight product will bring some volume back to its premium segment.

“We’re seeing customers in aerospace, high-end retail, diversified manufacturing, high tech.” Davis said. “We’ve not focused on this segment as much as we could have in the past.”

Source: James Cartledge, Post&Parcel

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