Talks fail to deliver DHL deal with An Post on SDS

Deutsche Post’s subsidiary, DHL, has exited talks to acquire outright or enter into a joint venture with An Post’s parcels and courier delivery arm, SDS.

However, the German postal giant could still be interested in snapping up individual aspects of the business if An Post decides to break up loss-making SDS.

The news has placed more pressure on the board of An Post ahead of a board meeting in July to discuss SDS’s options as part of its ongoing review of all aspects of its business.

The decision by DHL to back away from a deal some weeks ago followed negotiations between the two parties that included the current managing director of SDS, Gareth Thornton.

Prior to working with SDS, he was a former senior figure with Securicor-Omega, which was later rebranded as DHL following its acquisition by Deutsche Post.

An Post’s current options include holding on to some parts of SDS’s operations and selling off other elements.

Although SDS is on track to make losses of between 6m and 8m, double what had been originally projected, it has a number of valuable assets that would be likely to excite the interest of rival players were they to come into play.

These include its sophisticated Naas sorting operation, valued at 15m, as well as its large commercial book, which by some industry estimates has around 4,000 clients.

SDS has come under fierce pressure from both domestic and international competitors in recent years.

Most of the big international postal office players have aligned themselves with companies or subsidiaries other than An Post.

Among the big players, Deutsche Post uses DHL while United Postal Services (UPS) uses the Royal Mail, which in turn uses General Logistics Services (GLS), to deliver its parcels and packages in Ireland.

In addition, the French Post office uses Interlink, while the Dutch use TNT.

There have also been other deals between Irish-owned private operators such as Nightline and big international players such as FedEx which have further bitten into SDS’s market share.

This means An Post has lost out on international growth opportunities on parcels and delivery business coming from Germany, the US, France and the Netherlands.

SDS currently employs around 270 staff.

In 2003 An Post reduced staff numbers by 114 by introducing an owner / driver model in a bid to make its business model more competitive.

Turnover in SDS fell just over 10pc in 2003 from 79.9m to 71.8m.