EU Probe into FedEx’s TNT Takeover
U.S. parcel delivery company FedEx has offered a cool $4.8 billion dollars, about $8.70 a share, to buy TNT Express, a Dutch company that UPS failed to purchase two years ago. In 2013, the European Commission, The European Union’s antitrust body, blocked the attempt by UPS because they had concerns about competition and now they have a launched an investigation into the FedEx offer, stating concern of the dominance the two companies would have in some European sectors for the small package delivery market once they merged.
FedEx has been seeking to grow its company in Europe and TNT may be the best way to do it, since they have the largest and fastest road network in the country. Every member of the TNT Express board has given their support for the purchase, which is set to close in the first half of next year. Investors in TNT also supported the move, spurring a more than 30% increase of the company’s shares via trading in Amsterdam. If the deal goes through, FedEx will be able to continue their move overseas by combining their delivery potential with that of TNT’s and expend across all of Europe and Asia. They would edge ahead of UPS with about 22% of the international express-delivery market. DHL Express, which is part of Deutsche Post AG, will still be the largest company by marketshare in Europe.
Initially when the deal was announced in July, FedEx was not concerned that they would run into the same problem with their proposal. A statement from both companies read, “The combination of FedEx and TNT Express is not expected to raise antitrust concerns, principally as a result of the strengths of competitors in relevant markets.” But then saw an investigation launch within the same month…
Now that the inquiry is official, FedEx maintains they are still not worried and reports that they are not looking for ways to make the European Commission happier if they come back with a negative report. “We’re not working on remedy plans. We’re not anticipating that situation,” FedEx Express EMEA President David Binks said. “We’re anticipating the deal will be approved. I don’t think it’s any surprise that the commission is going to do the right level of due diligence to make sure that they are comfortable with the opinion they reach.”
Binks notes that FedEx and TNT are both big players in the world market for the delivery of small packages, and FedEx wants to continue growing and earn some of the influx of business the e-commerce market in Europe has been experiencing. Seeing other competitors struggle, executives at TNT have always thought that delivery costs would be too high if they tried to compete with internet companies such as Amazon, and they even shrunk their hand in the e-commerce market as a result. But FedEx is confident they can effectively expand into that sector. “I don’t think it’s a hurdle”, Binks said. “It’s an opportunity for FedEx and TNT together to look at that market segment as we go forward.”
Since the UPS deal fell through, it hasn’t been easy for TNT to keep growing in their market and they have been looking for alternative options. If the Fed Ex deal fails, TNT’s Chief Executive Tex Gunning has said, the future “will not be a bed of roses.” The European Commission has a December 7th deadline to complete their research and express any concrete concerns.