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UPS says TNT takeover talks 'constructive'

by Renee Cordes | Published March 16, 2012 at 9:47 AM

United Parcel Services Inc. said Friday, March 16, that it remains in "constructive discussions" regarding a possible takeover of TNT Express NV, signaling that it may be close to sealing a deal.

The Atlanta-based logistics company continues to court TNT about a month after its unsolicited, €4.89 billion ($6.4 billion) offer was rejected by its Hoofddorp, Netherlands-based peer.

TNT shares gained 0.45% to trade at €9.27 in Amsterdam Friday, slightly above UPS's spurned offer of €9 a share, valuing the company at just above €5 billion.

After rejecting the initial overture, TNT outlined a standalone strategy to capitalize on what CEO Marie-Christine Lombard referred to as an "unrivalled" European franchise with a unique service portfolio, dense networks and strong global presence. She said it planned to seek cooperation agreements with leading airlines as well as partnership opportunities for domestic activities in Brazil and China.

TNT's board was reportedly also unhappy with the terms attached to the first bid that may have required asset sales - and resulting job cuts - to win regulatory approval. A spokesman for TNT declined to comment Friday on the latest developments.

A deal between UPS would combine the second-and third-largest high-speed parcel delivery companies in Europe with a combined market share of 39%, overtaking the 37% share of Deutsche Post AG's leader DHL Express.

As UPS and TNT continue to negotiate, expectations have converged on a sweetened offer - either from UPS or its main U.S. competitor, FedEx Corp. of Memphis, Tenn., which controls about 10% of the European market.

"If UPS raises its offer, it will be a symbolic amount," predicted one analyst who asked not to be identified. "The fact that the companies are still talking probably means they are still niggling over conditions and have not yet discussed a new price." In addition, he said that TNT has little bargaining power to extract a much higher offer, saying that it needs UPS to add scale.

"TNT is a large player in Europe but the express business is a global business," the analyst said. "To be a global player you need to become one."

TNT was spun off last year from the Dutch postal operator, now doing business as PostNL, which holds a stake of about 29.9%. TNT traces its origins to 1946, when Ken Thomas set up a transport business in Australia with a single truck. It has been in Dutch hands since 1996, when KPN NV, which at the time owned the privatized Dutch postal service, acquired it.

TNT, which posted a net loss of €270 million in 2011, is under pressure from investors to turn itself around quickly. The UPS bid emerged just weeks after hedge fund Jana Partners LLC, working with Canada's Alberta Investment Management Corp., pledged to nominate a group of directors to TNT's board.

The funds, which own a combined 5% of TNT, cited "continued poor operating performance and deterioration of value" that they claimed "threatens TNT Express and all of its stakeholders.

In line with Dutch regulatory requirements, UPS said Friday that it plans to submit a request for approval of its offer documents to the AFM markets regulator within 12 weeks of Feb. 17, when it first disclosed its interest TNT.

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Tags: M&A | TNT Express NV | United Parcel Services Inc.

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UPS says TNT takeover talks 'constructive'

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