FedEx plans €4.4 billion takeover of TNT

Just over two years since European regulators shut down the acquisition of troubled TNT by Atlanta-based UPS, FedEx today announced its intent to take over the Dutch integrator.

FedEx is expected to purchase TNT for €4.4 billion, or US$4.8 billion in cash. “Europe, despite the fact that there has been low growth, is still an enormous market both for import and export,” said FedEx CEO Fred Smith. The price reflects €8 in cash per TNT share, which is a 33 percent premium on last week’s close, though still below what UPS offered in 2013, which was €9.5 per share. Reuters reported that FedEx’s decision to bid on TNT follows a 17 percent drop in TNT shares over the past year, versus a 21 percent rise in the benchmark Dutch AEX index. Also, a stronger U.S. dollar against the euro will work in FedEx’s favor.

TNT has an extensive road network in Europe, which is expected to marry well with FedEx’s strong air network. FedEx will retain TNT’s hub in Liège, but TNT’s 54 freighter aircraft will have to be sold to a third party per European airline ownership rules that forbid foreign companies to have a majority stake in a European operation. TNT chief executive Tex Gunning said “this deal is much better and simpler [compared with the UPS deal]. There is little overlap; our businesses are complimentary.”

Since the UPS deal fell through, TNT has struggled, reporting its fourth consecutive annual loss amid slow growth, operational setbacks and stiff competition. The European regional headquarters of the combined companies will be in Amsterdam/Hoofddorp. TNT hubs in Paris and Cologne will remain.

Assuming the acquisition goes forward, it is expected to close in the first six months of 2016. FedEx has agreed to pay TNT a US$200 million breakup fee if the transaction fails.

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