Industry awaits TNT’s logistics sell-off
The decision of TNT to put a 'for sale' sign on the majority of its worldwide logistics activities has prompted a series of questions from industry observers and analysts.
Much of the speculation revolves around the identity of likely potential buyers and whether the logistics business will be sold as one entity or hived off in pieces to several purchasers.
There are also questions about the timing of the move by the Netherlands-based mail, express and logistics group, and the reasons behind it.
Announcing its decision largely to withdraw from logistics during next year, TNT stated last week that a strategic review of its businesses had concluded that the group's strength lay in designing, implementing and running de- livery networks in the mail, express and freight management sectors.
Peter Bakker, TNT's chief executive, said the company had decided that 'while our logistics business is a strong operation, it will no longer fit with our strategic focus going forward'.
TNT added that the sale of the business, which was still subject to shareholder approval, was expected to be completed in the second half of 2006.
John Manners-Bell, chief analyst at British logistics industry research and analysis organisation Transport Intelligence, said he could see the strategic rationale behind TNT's decision.
'However, I also think it is a little bit surprising given a lot of what the company has been saying over the past year about how important logistics was to the overall business,' he added.
For example, Mr Manners-Bell continued, when TNT bought Scandinavian global forwarder Wilson Logistics last year it indicated that the intention was to integrate that business to provide global end-to-end logistics solutions.
In fact, one of TNT's statements about that acquisition, issued in June last year, specifically highlighted the perceived importance of its logistics clients at that time.
'By acquiring Wilson's freight forwarding capabilities TNT will be able to offer its existing contract logistics clients the full array of supply chain management services, now including air freight, sea freight and combined sea-air freight,' it said. 'The broadening of key strengths is expected to attract new clients in the contract logistics business.'
Industry analysts say a key factor in TNT's decision to sell its logistics business were the low and still declining margins being generated by that division and resulting pressure from shareholders, coupled with speculation about a possible takeover bid for the company.
The group's financial figures for the first three quarters of this year showed the operating margin for its logistics business running at just 2% while its two other core divisions, mail and express, achieved margins of nearly 20% and 9% respectively.
The belief that investor sentiment played a big part in TNT's decision to sell its logistics business was further reinforced by some of Mr Bakker's comments about the proposed move last week, including one which referred to developing 'a set of clear initiatives we believe will deliver value to shareholders'. TNT simultaneously announced a €1bn ($1.3bn) share repurchase.
As far as potential buyers of TNT's logistics business are concerned, Mr Manners-Bell suggested that because the Dutch group intended to retain the freight management side of those activities any company seeking to buy the whole operation would need to have its own forwarding network in place.
However, he continued, with one leading global forwarder, K'hne+Nagel, apparently out of contention, having recently bought European contract logistics provider ACR Logistics the former logistics division of British business services group Hays 'there are only a limited number of players who tick that particular box'.
Included in that group, he suggested, could be European forwarding giants Schenker, owned by German railway DB, and Swiss company Panalpina. Another potential name in the frame, according to some sources, could be Danish logistics group DSV, which primarily operates internationally under the name DFDS.
Other industry observers suggested that US global integrators FedEx or UPS, both of which are looking to expand their worldwide logistics activities, might become involved.
However, Mr Manners-Bell said he thought those two companies would probably be more interested in getting hold of the Dutch group's European express network but that was not for sale.
He also agreed that TNT's logistics business might be broken up for sale. In that context, he pointed to the group's recent sale of the majority of the contract logistics activities undertaken by its French subsidiary to one of that country's leading transport groups, Norbert Dentressangle.
'Anyone buying the rest of TNT's logistics operations would not now get a truly global business,' he said. 'They would be getting one with a hole in the middle of Europe.
'You would think TNT might have held on to see if they could get a buyer for the whole logistics business before actually selling off bits of it.
'But maybe that is the best they are going to be able to do if no one is going to want to buy the whole lot.'
Overall, Mr Manners-Bell concluded, he found the timing of TNT's decision to sell its logistics business 'slightly strange'. He also pointed out that TNT had indicated the sale would probably not be completed until the second half of next year 'which suggests they envisage quite a long process for actually finding buyers'.
