TNT Express “absolutely confident” of EU approval for UPS deal
TNT Express board members said today they were “absolutely confident” that European competition authorities will approve the company’s acquisition by rivals UPS.
In an Extraordinary General Meeting in Amsterdam today, shareholders expressed concern about the risk that the EU Commission’s decision to subject the proposed EUR 5bn takeover to addition antitrust review could see them rejecting the deal entirely.
But executives and board members said today that “many” proposed acquisitions go to a second-stage EU Commission review, and that 90% of them are subsequently approved.
“We are absolutely confident it will go through,” said Antony Burgmans, outgoing chairman of the Supervisory Board at TNT Express today. “What is happening in Brussels is in line with exactly what we at TNT thought would happen. Of course we would have been happy for it to all go through in Phase 1, but we didn’t expect that.”
UPS made its EUR 9.50 per share offer for the whole of TNT Express back in March, formally asking the EU Commission for permission in May. The Commission came back last month to announce the need for a Phase 2 review, which is now set to take until 12th December.
Today, TNT Express executives said that once the clearance is given, TNT Express shareholders could receive payment from UPS for their shares within the matter of days.
UPS had previously set a deadline for its TNT Express offer to be finalised by 31st August 2012, but the TNT board members said today that UPS would be coming forward with an extended deadline, in light of the EU Commission phase 2 review, “in due course”, with the deadline likely to move to the fourth quarter.
The combined UPS-TNT company would have annual revenues of around EUR 45bn, with only about 36% of its activities taking place outside the United States. Nevertheless, the European Commission was rightfully protecting the level of competition within European express markets, board members said.
Expressing his confidence the deal would go through in the fourth quarter of 2012, Burgmans said today that the original agreement with UPS had been structured to ensure European competition authorities would allow it to go ahead and that the certainty of the transaction would be “very high”.
Last month the European Commission said its concerns with the UPS-TNT deal centred in large part around the “very high” market share that the merged company would have in certain European express markets.
Today, board members declined to offer any further details into what areas of the business the EU authorities were particularly concerned about.
Fair value
TNT Express CEO Marie-Christine Lombard says TNT Express and UPS is a “merger of equals” in Europe
The meeting today saw shareholders representing more than 65% of issued share capital in TNT Express present. The acquisition deal will need 80% of shares to be tendered to UPS in order to go ahead.
Board members expressed once again their unanimous support for the deal, the benefits of the merged company and the “fair value” of the EUR 9.50 per share offer.
This latter point was questioned by shareholders today given that one of the two investment banks assessing the offer as fair value was Goldman Sachs, which has faced a number of embarrassing scandals in recent months including accusations of misleading customers.
Shareholders were told that Goldman Sachs had been working for TNT Express for “dozens of years”, proving their impartial status. During the EGM, TNT Express shareholders appeared somewhat burned by analyst predictions recommending last year’s demerger from Dutch postal operator PostNL, which had suggested the move would lead to TNT Express shares soaring in value. Following the merger, TNT share values plummeted until details of the UPS interest began to emerge.
At today’s meeting, TNT Express board members also addressed shareholder concerns that other options for the company could exist other than being acquired.
Burgmans and TNT Express CEO Marie-Christine Lombard said they believed merging with UPS represented a better outcome than any standalone strategy for the company could achieve.
Lombard said positive talks had been held with European unions regarding the deal and that UPS had made certain promises in its offer to protect the operations at Liege Airport, maintain a significant presence in the Netherlands, and safeguard the uniqueness of the TNT Express road networks.
She said on completion of the deal UPS would be phasing out the TNT brand on a country-by-country basis, but “carefully” so that the combined company does not lose the attachment of the customers.
“What’s important with this merger with UPS is that we are going to be creating the global leader in express deliveries,” she said. “This is more a merger of equals than really an acquisition per se, especially in Europe.”
