UPS and TNT offer remedies to win EU backing for merger

UPS and TNT Express have proposed the sale of certain business activities and assets in a bid to persuade European competition authorities to allow their merger. The two companies issued a statement today confirming that they have now submitted the offer to the European Commission.

However, they provided no details on what is being offered for sale.

“The discussions are ongoing, which means that the offered remedies may be subject to change,” the companies said in their joint statement.

The Commission will model the proposed remedies on a “confidential basis” before deciding if it is an acceptable way forward.

UPS and TNT Express said they were still expecting clearance in early 2013. Submitting the proposed remedies now has a knock-on effect of putting the official Commission deadline for completing its investigation back to 5th February 2013.

Growth engine

UPS is offering about EUR 5.16bn to buy rival integrator TNT Express, but the Commission decided back in July to investigate the deal in detail, out of concerns that a merged UPS-TNT would reduce the amount of competition available in the European express market, particularly in the international express delivery of small packages.

TNT Express had revenues of EUR 7.25bn in 2011, while UPS had global revenues of EUR 4.8bn ($53.1m USD).

Europe is already the largest region for UPS outside the United States, with the “highly fragmented” market accounting for about half of its international revenue. Europe is seen by Atlanta-based UPS as one of its “growth engines”, with exports such an important part of EU trade.

Even aside from the potential TNT acquisition, UPS has been expanding its capacity in Europe, including a $200m investment in its European air hub in Cologne that should boost its capacity by 70% when completed in 2013.

UPS and TNT repeated past assertions today that their merger will create “a more efficient logistics market”, actually improving the competitiveness of Europe and the services for businesses and consumers.

“Customers and consumers will benefit from a broader portfolio of services and better global access, along with lower supply chain costs overall and improved service levels in terms of timing and reliability,” they said.

Sell-off

As part of the proposed merger, TNT Express has already put its airlines, TNT Airways and Pan Air, up for sale.

European company ASL Aviation is in line to buy the airlines, so that they can continue to enjoy full access to European air routes, which a non-European company like UPS could not secure under EU laws.

As they confirmed that further parts of the business could be put up for sale, the companies said they would follow recognised procedures regarding employees concerned.

“UPS and TNT Express value their employees highly,” the firms said. “Both UPS and TNT Express will follow the required consultation and advice procedures with their works councils with regard to these remedies.”