FedEx plans to buy Dutch delivery company TNT Express for $4.8 billion (4.4 billion euros). This move will bring a new competitor amongst European delivery companies such as United Parcel Service (UPS) and Deutsche Post.
UPS had the same plan in 2013 but European regulators blocked the initiative because it would have suppressed competition.
Analysts consider FedEx made the right move as this takeover will offer additional European road networks to a company known for its strong air fleet.
According to FedEx communications vice president Patrick Fitzgerald, another reason behind this initiative is that it will help lower European service costs.
ING analysts concluded that at this time, Deutsche Post’s DHL holds 19 percent of the European market shares while UPS has 16 percent. TNT follows with 12 percent and FedEx holds 5 percent. But once the deal between the last two companies will be closed, FedEx will go straight to second place.
It is most likely that the dollar’s increasing strength might have contributed to FedEx’s decision. UPS shares are estimated at 9.50 euros (around $12.50) while FedEx’s share offer is worth 8 euro (or $8.75) today.
TNT stock has also risen by more than 30 percent on Tuesday April 7.
ABN Amro analyst Maarten Bakker considers FedEx “laid an attractive offer on the table” and that “having always been the most logical predator of TNT Express”, the chances of an offer being made by a competitor are slim.
UPS is trying to change the decision made by European regulators in 2013 to block the company’s bid for TNT but stated it would not make another offer, whatever the outcome. UPS also wanted to be certain that the EU decision did not trigger the setting of a precedent.
TNT was also affected by European regulator’s block. The company would have had some benefits out of a deal closed with UPS as it would have incorporated UPS’s logistics plan.
TNT’s European shares have gone down 5 percent since the UPS deal had been canceled. The company needed to take some preventive measures which implied lowering costs, selling operations and further developing its road network in order to maintain customers.
Taking into account TNT’s lower market position and the fact that European competitors are unlikely to make a rival offer, Kepler Cheuvreux analyst Andre Mulder considers FedEx has “made a smart move”.
Image Source: MultiChannelMerchant