Bloomberg: UPS Agrees To Buy TNT Express NV For $6.8 Billion

United Parcel Service (UPS), the world's largest package delivery and logistics company, has reached an agreement to buy TNT Express NV, after raising its bid for the smaller rival from 9.50 ($12.51) to 10 per share, Bloomberg yesterday reported, citing two people with knowledge of the talks.

Under the deal that is likely to be announced today, Atlanta, Georgia-based UPS will hike its offer from $6.43-billion to $6.8 billion.

The potential acquisition would be UPS's largest in its 105-year history after it purchased Overnite Corp in 2005 for $1.2 billion.

On March 16, TNT Express, Europe's second-largest package-delivery company said that it was still in talks with UPS after turning down its $9 a share offer in February.

Buying the Hoofddorp, Netherlands-based company, will give UPS a stronghold in Europe, China, Russia, Brazil and India, most of which have high growth potential. It would put UPS on par with Europe's market leader DHL - a unit of Germany's Deutsche Post AG.

TNT Express holds a 9.6 percent market share in Europe, while UPS holds 7.7 percent, bring the combined stake to 17.3 percent and nearly on par with DHL, which holds a 17.6 percent market share.

TNT has fully-owned operations in 65 countries and delivers documents and parcels to over 200 countries. The company has a fleet of 26,000 trucks, 47 cargo planes and has a worldwide network of more than 2,400 depots and hubs. It recorded sales of over $7 billion in 2010.

UPS is already in a dominant position in North America and its CEO Scott Davis had earlier said that he would seek opportunities to grow in emerging markets.

Speculation increased that TNT would be a prime acquisition target after it spun-off its express unit and mail businesses PostNL last year, with PostNL retaining a 29.9 percent stake in TNT, whose name derives from the post-war Australian company Thomas Nationwide Transport.

Since the spin-off, TNT's market value has sunk amid profit warnings. It posted a net loss of $97 million for the first nine months of 2011 compared with a profit of $62 million a year earlier.

UPS CFO, Kurt Kuehn told German newspaper Boersen-Zeitung in May 2011 that his company was not interested in acquiring TNT's Express unit, but was keen to buy small and medium-sized companies in Europe rather than go in for large acquisitions.

Having made small acquisitions in Europe last year, UPS last month completed the purchase of Brussels-based delivery firm Kiala in order to expand its presence in Belgium, France, the Netherlands, Spain and Luxembourg.

Armed with $4.13 billion in cash and near-cash items and capitalising on a strong dollar, the ongoing economic crisis in Europe, and TNT's low market value, UPS must have decided that it was the right time to launch a raid on TNT, say analysts.