UPS, TNT Deal Falls Apart

  United Parcel Service Inc. (UPS) said Monday it has abandoned its protracted, $6.8 billion bid to take over smaller Dutch parcel-delivery company TNT Express NV (TNTEY), after encountering unexpectedly stiff objections to the deal from the European Commission’s antitrust regulator.

Despite months of negotiations, UPS said it expects the Commission to block the proposed acquisition after a meeting with the antitrust body of the European Union’s executive arm last Friday.

UPS had originally expected to receive approval for the deal after a first phase review, but the process dragged on, highlighting the Commission’s concerns about future competition in the market for overnight deliveries of parcels in Europe. The acquisition, which would have been the biggest in UPS’s 105-year history, was announced in March last year.

The U.S. firm had offered remedies on Nov. 29, and revised its proposal twice to overcome the Commission’s concerns, it said.

Negotiations with the Commission continued into the new year, with UPS’s hopes increasingly riding on whether it could convince the regulator that sales of UPS and TNT assets to DPD, a small parcel-delivery firm controlled by French state-owned postal group La Poste, might create a credible new European competitor to meet competition concerns.

“We are extremely disappointed with the EC’s position. We proposed significant and tangible remedies designed to address the EC’s concerns with the transaction,” said UPS Chief Executive Scott Davis.
UPS had offered 9.5 euros ($12.67) a share for the Dutch firm, which was split from Dutch postal company PostNL under pressure from shareholders who argued the express business would be an interesting acquisition target for its U.S. rivals. After UPS had announced its bid for TNT, shareholders speculated on a counter bid from FedEx Corp. (FDX), which didn’t emerge.

The Commission’s tough stance on the UPS-TNT deal echoes a similar position it took in objecting to the $17 billion merger between Deutsche Borse and NYSE Euronext (NYX) early last year largely because it was worried about the combined companies’ dominant position in a particular segment of financial services, the exchange-trade derivatives market. For UPS, the Commission’s concerns focused on the lack of competition in the overnight parcel-delivery segment if it acquired TNT.

Still, in between its objections to the big securities exchanges and logistics deals, the Commission did approve Universal Music Group’s $1.9 billion of EMI Group PLC’s recorded music division last July.  

Source: Dow Jones