THE HAGUE, Jan. 15 -- United Parcel Service (UPS) on Monday abandoned a huge bid for Dutch TNT Express, bending to EU anti-trust pressures and ending a bid to create the biggest European delivery group and boost its global position.
The decision to end the 5.16-billion-euro ($7.03 billion) takeover, announced by target company TNT Express, immediately slashed nearly two billion euros from TNT's capitalisation of 4.481 billion euros late on Friday to about half the value of the UPS offer.
Both companies said UPS had agreed to pay a cancellation fee to TNT of 200 million euros, after EU competition authorities had warned them that it was set to block the deal because it would have unduly restricted competition in Europe, even though UPS had amended its terms in an attempt to satisfy the European Commission.
The value of TNT Express plunged from 4.481 billion euros ($5.9 billion) on Friday to 2.56 billion euros on Monday morning, or to 4.10 euros per share at opening compared with the bid terms of 9.5 euros per share, but recovered to about 4.9 euros a share by mid-day.
TNT Express made clear in a statement that it had worked hard to help the deal go through, but the biggest loser from the cancellation stands to be the biggest shareholder in TNT, the Dutch postal delivery company PostNL.
PostNL owns 29 percent of TNT and hoped to use the proceeds of the takeover to reduce debt, an analyst said.
The Dutch group TNT said it regretted the announcement by UPS and spokesman Cyrille Gibot told AFP: "We thought the merger was possible."
He said: "UPS was leading the process - we did everything we could to support UPS to get clearance."
He said TNT would now focus on a "stand-alone strategy" but that "the goal was clearly to complete the merger," adding that more details would be announced later.
TNT Express said in a statement from Hoofddorp in the Netherlands: "UPS informed TNT Express that UPS sees no realistic prospect that EC (European Commission) clearance can be obtained and that UPS will not pursue the transaction on any other basis."
UPS, based in Atlanta in the United States, said separately: "Upon prohibition by the EC, the offer condition relating to EC competition clearance will not be fulfilled and UPS will pay a termination fee in the amount of 200 million euros and will withdraw the offer."
The decision is despite an attempt by UPS last year to overcome competition concerns by amending its bid.
EU competition authorities had warned that the takeover as constructed would result in damaging concentration in the European market for express delivery.
EU competition officials met UPS and TNT Express representatives on Friday and "informed the companies that on the basis of UPS's current remedy proposal it is working towards proposing a prohibition decision," TNT Express said.
UPS then told TNT it would not continue chasing the deal and that "formal termination of the merger protocol will occur upon receipt of the prohibition decision of the EC, which.TNT Express deems inevitable," TNT Express said.
In a separate statement UPS' chief executive Scott Davis said the US-based company was "extremely disappointed with the EC's position."
"The combined company would have been transformative for the logistics industry," he added.
Nico van Geest, an economic analyst at the Amsterdam-based Keijser Capital said the biggest loser was Dutch postal company PostNL, which hoped the deal would help it pay off its debts in the market.
TNT however "remains strong in Europe and is rising in upcoming markets. It does not have any debt and is busy with its own cost-saving programme," Van Geest added.
In June, UPS launched a bid to take over TNT Express, but the EU competition authorities announced a month later that they would investigate the deal.
The EU said it was worried that the proposed merger would reduce the number of competitors from four to three and lead to a highly concentrated market for domestic and international express delivery services on the European continent.
The deal was expected to put UPS ahead of its two competitors as it would strengthen its position in Europe and globally.
UPS and TNT Express are major players in the sector for delivery of packages and are two of four firms with a comprehensive air and road delivery network on the continent.
Others present in Europe are DHL, owned by Deutsche Post, and FedEx, a US-based company.
TNT Express is a global player operating in more than 200 countries and maintains a leading role in the road freight network in Europe. It employs some 77,000 people.
UPS is the world's biggest package-shipping group, with annual revenues last year of $53.1 billion and 400,000 employees. Published by HT Syndication with permission from The News Tribe. For any query with respect to this article or any other content requirement, please contact Editor at [email protected]
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