United Parcel Service Inc will buy TNT Express NV, Europe’s second-largest express delivery company, for 5.16 billion euros (US$6.8 billion) in the biggest deal in the US company’s 105-year history.
UPS, the world’s biggest express parcel-delivery company, secured the purchase after raising its offer to 9.50 euros a share in cash, the companies said in a joint statement. TNT’s management and supervisory boards recommend shareholders accept the deal, they said in the statement.
Combining Atlanta-based UPS with TNT will put the company on equal footing in Europe with Deutsche Post AG’s DHL, the region’s biggest delivery operator. The deal secures a higher value on the loss-making Dutch company than the 9 euros a share that directors turned down last month. Yesterday’s deal is a 54 percent premium over the closing price of 6.18 euros on Feb. 16, the day before the talks were made public.
The agreement creates a delivery provider with 45 billion euros in annual sales and the combination will result in pre-tax cost savings of 400 million euros to 550 million euros annually by the end of the fourth year after the deal closes, the companies said in the statement. The cost of combining with TNT over the four-year period will be about 1 billion euros.
In an industry in which UPS, FedEx and DHL already operate on a global scale, TNT was a “once-in-a-lifetime chance” for one of the biggest competitors to grow by acquiring a substantial rival, Katrina Dudley, a portfolio manager at Mutual Series, a Franklin Templeton Investments unit, said last month. Mutual Series owns TNT shares.
UPS has completed the acquisition of Brussels-based Kiala to bolster operations in Belgium, France, the Netherlands, Spain and Luxembourg, after several smaller purchases in recent years, said David Campbell, a Thompson Davis & Co analyst in Richmond, Virginia, who recommends buying UPS and FedEx.
UPS, known for its brown vans and trucks, controlled 7.7 percent of the European express parcels market in 2010, compared with TNT’s 9.6 percent, according to Transport Intelligence. Combined, they would be about as large as DHL, which had a 17.6 percent share.
Buying TNT will be UPS’s biggest purchase since the company was founded in 1907 as a bicycle-messenger service. The deal tops the 2005 acquisition of Overnite Corp for about US$1.25 billion in cash, which gave UPS the ability to make US land shipments of parcels too large to be lifted by a driver.