EU Commission probes $6bn UPS offer for TNT Express
The European Commission confirmed on Friday that it has opened an “in-depth” investigation into the proposed $6bn acquisition of TNT Express by rivals UPS. The executive branch of the European Union said its preliminary investigation into the EUR 9.50 per share offer from Atlanta-based UPS “indicated potential competition concerns”.
In particular, the Commission said it was looking at impacts in the international express delivery market in “numerous” European countries, where the combined UPS-TNT would have “very high” market shares.
UPS and Netherlands-based TNT both came out just over a week ago to warn investors of the heightened interest by EU antitrust regulators, predicting that the deal would not be concluded by the fourth quarter of the current year.
The Commission said on Friday it expects to take until 28 November, 2012, to make a decision on whether the merger would significantly hamper competition in the European delivery markets.
Joaquín Almunia, the EU Commission vice president for competition policy, said protecting competition in small package delivery was of particular significance because of the “strategic importance” of the sector to other industries in Europe.
“The proposed acquisition could in particular reduce competition for the provision of the fastest express delivery services, to the detriment of direct customers and ultimately of European consumers,” Almunia said.
“The Commission needs to make sure that customers continue to have access to these services at competitive conditions.”
Investigation
The EU Commission usually clears merger proposals within a one-month (Phase 1) review, and only moves to a more in-depth Phase 2 investigation if its initial findings raise concerns about weakening competition in a particular market.
Explaining its areas of concern, the EU Commission said that reviewing the various segments of the small package delivery market, it believed that for “most” express services, particularly on the faster end of the market, the four integrators DHL, FedEx, UPS and TNT Express were the “only significant competitive constraint”.
The Commission said reducing the number of integrators down to three would mean the competitive constraint in the express market being “significantly reduced”.
“This would lead in many Member States to a highly concentrated market for domestic and, even more so, international delivery services,” said the Commission.
UPS first agreed a deal to buy TNT Express back in March 2012, offering a 53.7% premium on the February share price.
If the deal does win EU Commission approval, which both companies have expressed confidence of happening, the resulting combined group would have revenues of around $60bn USD (EUR 45bn), with around 36% of combined revenues generated outside the United States, compared to 26% for UPS today.
UPS is expecting a four-year integration programme to bring the two networks together, with expectations of making EUR 400 to 550m in synergy-related cuts in the current networks to avoid overlap.
