American parcels giant eyes the bid territory for Exel
AMERICAN parcels giant UPS is working with investment bank Goldman Sachs to explore whether it should enter the fray for Exel, potentially triggering a bid battle for the British supply chain company.
UPS, which is valued at $78billion ( pounds 42billion) and has very little debt, has long kept a watching brief on Exel, which on Thursday revealed it had received a preliminary takeover approach from Deutsche Post, the German owner of the DHL courier business. Exel shares slipped 3½ yesterday to pounds 11.75, valuing the business at pounds 3.4billion. UPS has been building up its freight forwarding operations, through 2001’s $450m acquisition of Fritz and last year’s $150m purchase of Menlo Worldwide Forwarding but lacks Exel’s strong presence in contract logistics – managing the supply chain for blue-chip companies.
Acquiring Exel would maintain UPS’s leadership in parcels delivery, freight forwarding and contract logistics.
Analysts said UPS would be able to outbid Deutsche Post, if it chose to bid. Mark McVicar, at Dresdner Kleinwort Wasserstein, said: “They have very deep pockets and they do like to be number one. They are not used to being second, which is where they would be if Deutsche Post buys Exel.
“But they are a conservative company and may not want to get involved in a bidding war 7,000 miles away.”
Deutsche Post is thought to be about a fortnight away from making an offer for Exel and UPS would not be expected to make any move until Deutsche’s offer is in front of Exel chief executive John Allan.
Analysts believe Deutsche could afford to bid pounds 13 a share. However, the company’s shareholders have given its approach a lukewarm reaction with the shares dropping for the second day running, down 7 cents to euros19.58 yesterday, after a near-4pc fall on Thursday.
One analyst said: “Deutsche has a reputation for paying up and beneath John Allan’s cuddly exterior, he’s as tough as old boots. If he’s going to end his career two years earlier than he thought he was going to, he’s going to insist on an extra 50p a share.”
UPS yesterday declined to make any comment on its intentions or the work it was doing with Goldman. “I really can’t comment on any business negotiations,” said spokesman Rebecca Treacy-Lenda.
