Commentary: EC grounds UPS/TNT merger
The European Commission has spoken, and a blockbuster merger between two of the world’s biggest integrators, which would have created a monolithic logistics firm in Europe, is no more.
Though the commission has until February to officially decide, it has privately told both parties that the more than $6 billion deal is dead. UPS officials have, in turn, told their counterparts at TNT Express that they’re leaving the table for good.
While there obviously were significant reservations at the European Commission, most industry officials seemed to think that, in the end, the deal would go through. It certainly had been in the air long enough, with UPS and TNT first outlining the merger in early 2012, and the two firms seemed to be making all the right concessions. To appease the commission, UPS agreed to open its European network to third parties, and TNT Express had a deal in place to sell its air freight divisions.
The commission, though, still foresaw a lack of competition in the overnight parcel sector had a deal gone through. To alleviate these concerns, many thought FedEx would at least express some interest in gaining traction in Europe through UPS’ infrastructure, though that was not the case. Some blamed DHL for muddying the waters.
At Transport Intelligence, Joel Ray said the deal was a victim of politics, adding the commission’s reluctance was “driven by a desire to engineer a market structure through political motivations.” He said European shippers ultimately lost out.
“European shippers would have gained from the acquisition through a strong new road- and air-based player,” he said. “This decision has set the market back many years and risks reducing competition, not increasing it.”
But perhaps large mergers are simply a thing of the past. In October, a potential merger between the European Aeronautic Defense and Space Co. and BAE Systems failed. Earlier in 2012, Deutsche Boerse and NYSE Euronext were prevented from consummating a $7.4 billion deal; a previous bid for NYSE Euronext had already failed in the United States.
The deal that wasn’t has left UPS relatively whole — except for a $267 million termination fee — but TNT Express is in pieces. The company’s major shareholder, PostNL, has already talked about monetizing its substantial stake — in effect, abandoning ship. TNT shares fell immediately after news of the European Commission’s impending decision leaked Jan. 14, and industry watchers see this as a bit of a crisis for TNT.
“At the end of the day, I don’t know what TNT is ultimately going to do,” Bill Greene, managing director of transportation at Morgan Stanley, said during a market update Webcast. “At this point, they have to refocus; they need a CEO and a standalone strategy.” — Jon Ross