[170113.EN.LOG] UPS Abandons TNT Express Buyout Bid As EU Regulators Move To Block Deal

UNITED Parcel Service Inc, the Atlanta-based express delivery giant, is abandoning its plan to acquire TNT Express for EUR5.2 billion (US$7 billion) as the European Commission has made a clear decision to block the proposed takeover bid.

The announcement wiped out half of TNT's share value at a time the company is reported to be struggling to turn around in Europe, its primary market.

The collapse of the deal will make it harder for UPS to achieve its goal of expanding in Europe alone, yet through TNT it would have had access to its European network and business in the rapidly expanding regions of Asia and Latin America, reports the American Journal of Transportation in Massachusetts.

UPS would also have to adjust itself to the loss of opportunity, according to Rabobank analyst Philip Scholte. "This is going to make it hard for UPS to increase its position in Europe on its own," he said.

To gain regulatory approval from the European Union, UPS had offered various concessions, including a proposal to sell warehouses and customer bases in 15 countries, mainly in Eastern Europe.

"We proposed significant and tangible remedies designed to address the EC's concerns with the transaction," said UPS chairman and CEO Scott Davis.

"The combined company would have been transformative for the logistics industry, bringing meaningful benefits to consumers and customers around the world, while supporting growth in Europe in particular," he told Reuters.

Other media reports said that UPS and TNT Express claimed the European Commission had told them it was working on a decision to prohibit the proposed acquisition, leaving them no choice but to abandon the plan.

Upon withdrawing its bid, UPS would normally be expected to pay TNT a termination fee of EUR200 million, but will withdraw that offer after the EC makes a formal decision.

In response to media enquiries, European Commission competition policy spokesman Antoine Colombani said the decision would be taken before the February 5 deadline.

The disappointing outcome comes at a time of weaker demand in Europe, which led to a capacity reduction. Meanwhile, TNT Express was plagued with restructuring problems in Brazil, and its mainland China business is too small to consider it a major player in the market. Furthermore, its chief executive stepped down shortly after UPS made its offer, and the company is yet to appoint a new head to devise a new business strategy.

Source : HKSG, 16.01.13.