The surprise announcement comes nearly a year after TNT agreed to an improved, €9.50 per share offer from its Atlanta-based suitor, which also took on the deal's regulatory risk. On Monday, UPS confirmed that it will pay TNT the agreed €200 million breakup fee.
TNT shares plunged almost 43% Monday morning in Amsterdam to trade at €4.73, giving the Amsterdam-based company a market value of just below €2.58 billion. UPS shares closed at $77.92 Friday on Wall Street, valuing the equity at $74.7 billion.
"The cancellation has put TNT Express back into play, albeit at a reduced valuation as the richest wedding candidate has been removed from the ball, as has his closest rival," noted analyst Geert Steens of SNS Securities NV, referring to UPS and to European market leader DHL Express, a unit of Deutsche Post AG. The regulator has made clear that a tie-up with Memphis-based FedEx Corp. or DPD, a unit of France's La Poste SA, would not worry the Commission as much, he added.
Steen left his "hold" rating on TNT shares unchanged, with a €4.00 share price target.
The companies' retreat comes about six months after the European Commission opened an in-depth probe, and three weeks before the Feb. 2 deadline for a ruling. Last year, the Commission vetoed Deutsche Börse AG's attempted takeover of NYSE Euronext, its 22nd prohibition since it began vetting mergers in 1989 and fourth since merger control rules were strengthened in 2004.
As recently as late November, the companies said they were still planning on completing the deal early this year after submitting concessions to Brussels regulators. EU Competition Commissioner Joaquín Almunia had said the deal may need "substantial remedies" to win approval.
The companies said Monday they had been informed by the antitrust case team "that, on the basis of UPS's current remedy proposal, it is working towards proposing a prohibition decision.
"Subsequently, UPS informed TNT Express that UPS sees no realistic prospect that EC clearance can be obtained and that UPS will not pursue the transaction on any other basis," it added. "Formal termination of the Merger Protocol will occur upon receipt of the prohibition decision from the EC, which, based on the above, TNT deems inevitable."
TNT referred to the protracted merger process as a "distraction" for management, which it said will now focus on reassuring customers of its "commitment to providing industry-leading services" and "strengthening its strategy, including further steps to improve profitability."
The Commission had not yet made any announcements about the case Monday morning, and still shows the case with the Feb. 2 deadline in its online case docket.
Had it gone ahead, the deal would have brought together the second- and third-largest high-speed parcel delivery companies in Europe with a combined market share of 39%, overtaking the 37% share of DHL Express, which is also the global leader. The enlarged entity would have pulled in annual revenue of more than €45 billion.
Geoffrey F. Aronow joined Sidley Austin LLP as a partner in the global securities and derivatives enforcement and regulatory practice. For other updates launch today's Movers & shakers slideshow.
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