TNT feels heat as ‘break-up’ camp grows
TNT, the Dutch mail group, will today come under pressure to make clear its intentions for its struggling logistics division, as analysts ponder the potential sale of the unit or the break-up of the business as a whole.
Anticipation has been heightened by TNT’s decision to schedule a press conference this morning, ahead of a briefing for analysts. The company would not comment on either event, but in October promised it would discuss logistics strategy with analysts.
Bert van Hoogenhuyze, at Theodoor Gilissen in the Netherlands, said: “Analysts will look for answers on the future of its logistics business. There is so much competition and the unit has not been achieving the returns of five years ago.”
Dresdner Kleinwort Wasserstein said in a recent note on TNT: “The pressure is definitely on. The ‘break-up’ camp is growing.”
Noting market concerns about a number of “one-off issues”, DrKW highlighted “the perennial underperformance of logistics where huge amounts of capital have been invested, a seemingly unchanged strategy in terms of divisional make-up and a conservative balance sheet strategy”.
TNT will take a Euros 140m (Dollars 164m) charge this year to restructure logistics, and is divesting loss-making French units. The unit has focused on increasing its presence in China.
The division made an operating profit in the first nine months of Euros 68m on sales of Euros 3.38bn, offsetting strong performances in mail and express.
But logistics woes are only one of several issues piling pressure on Peter Bakker, TNT chief executive.
In September, the company launched an independent inquiry into “possible illegal acts” at unnamed subsidiaries related to tax. That followed an investigation last year which led to a Euros 59m charge. The financial fall-out from the current probe, which TNT hopes will be completed in time to certify 2005 annual accounts,has been estimated byanalysts at between zero and Euros 900m.
Nor has the company’s image been helped by the recent announcement of the resignation of Jan Haars as chief financial officer, in spite of TNT’s insistence that it was unconnected to the tax affair.
Separately, Cornelius Geber, a German private equity investor, last month announced he was trying to put together a consortium to buy TNT. If realised, it would be among the biggest venture capital buy-outs in Europe. Analysts believe TNT would command a price tag of about Euros 14bn.
Mr Geber said he was in discussions with at least two interested financial investors and at least two strategic buyers. The company has also been linked with UPS, the US parcel carrier.
Mr van Hoogenhuyze said: “There is no smoke without fire. TNT is definitely in play.”
Additional reporting by Patrick Jenkins in Frankfurt
