La Poste's Challenge

La Poste's Challenge
From TRAFFIC WORLD, January 8th, 2001

By JOHN PARKER French postal service bids $400 million for larger stage in German parcel
service
Copyright 2001, Traffic World Magazine Paris The French postal service, La Poste, is expected to pay close to $400 million
to acquire an additional 35 percent stake in Germany's second-largest
express-package delivery company. The tentative deal, which should be
completed by the end of February, will give La Poste 85 percent ownership of
Deutscher Paket Dienst (German Parcel Service), the biggest domestic rival to
Deutsche Post and the operator of an extensive franchised Pan-European
network.
Coming on the heels of its $270 million acquisition of Mayne Nickless' express
parcels businesses in the United Kingdom and Ireland last November, the
tightening of its control over DPD is part of La Poste's strategy to challenge
Deutsche Post not only in its backyard but across Europe. It also represents a
defeat for the British post office, which owns 10 percent of DPD, and has been
in a struggle with La Poste to control the company's Pan-Europe network. Royal
Mail reportedly is prepared to sell its 10 percent stake if the La Poste deal
goes through.
Under DPD's complex corporate structure, La Poste needs 75 percent ownership
of the company to have management control. La Poste, which owns 50.6 percent
of DPD shares, is buying the additional 35 percent stake from the members of
Frankfurter Kries, a group of six freight forwarders that were part of the
original 18 German companies that founded DPD in 1976. The alliance of small
carriers created the first private express package delivery company in Germany
and for a few years was the only competitor to Deutsche Post until United
Parcel Service arrived in 1979.
DPD's management has clearly favored La Poste in the struggle between the two
postal authorities for control of the company.
Last August, when the British post office bought its stake in DPD through the
acquisition of DPD Dachser GmbH, DPD's management board strongly protested the
fact that the Royal Mail would gain knowledge of its strategies and corporate
plans. It called the deal "a violation of DPD's franchise and shareholder's
agreement" and said legal action "cannot be excluded." Royal Mail already owns
German Parcel GmbH, a domestic competitor of DPD.
On the other hand, when La Poste bought Nickless' Parceline and Interlink
businesses in November, DPD praised the acquisition. The two companies are
part of DPD's franchised European network, but operate domestically under
their own brand names.
"The acquisition of one of our major European franchisees is a milestone in
DPD history because it will strengthen the European DPD business
substantially," said Peter Hoffman, spokesman for the DPD management board.
"Even skeptics cannot but realize now that La Poste and DPD stand shoulder to
shoulder, getting a good bit closer to our common strategy to secure a
competitive position among the three largest parcel providers in Europe."
DPD had revenue last year of about $1.4 billion. Its network consists of 25
major hubs and about 400 terminals in 18 countries in Western and Eastern
Europe. It operates a fleet of more than 12,500 trucks and vans and handles
about one million parcels a day.
Although some question just how successful La Poste will be in integrating the
operations of its recent string of acquisitions, the management board of DPD
has been dealing with that issue since its inception. In Germany, its national
network required knitting together the regional operations of its original 18
member companies into a single seamless service. It has expanded into other
European countries through franchises, creating a decentralized structure that
poses its own special integration problems.
But if the deal goes through and is approved by the European Union, the La
Poste/DPD network will pose a serious competitive challenge to Deutsche Post,
UPS Europe, TNT Post Group, and the British post office. Among those
competitors, only the British post office has yet to complete the building of
a Pan-European express package delivery network. And through a strategic
alliance with FedEx, La Poste plans to challenge these competitors in
intercontinental markets too. TRAFFIC WORLD, 08th January 2001