UPS buys TNT Express for $6.77 billion

After protracted public negotiations, UPS will acquire TNT Express for $6.77 billion, a deal that comes a little more than a month after TNT Express rejected UPS’ $6.4 billion acquisition offer.

The all-cash offer comes out to a per-share price of a little less than $12.50. The transaction is slated to close in the third quarter. According to a joint press release, “The combination of UPS and TNT Express will create a global leader in the logistics industry, with annual revenues of more than €45 billion ($60 billion) and will deliver significant benefits for the shareowners, customers, employees and other stakeholders of both companies.”

The deal has been given the go-ahead by the supervisory and executive boards of TNT Express. PostNL, which holds 29.8 percent of the outstanding shares in TNT Express and had been reportedly holding up an earlier deal between the two firms, has committed itself to the acquisition. The deal helps UPS gain a bigger share of business outside the U.S. Today, 26 percent of the integrator’s revenues are derived from outside America’s borders; once UPS integrates TNT Express into its system, that number will rise by 10 percent.

According to a press release, UPS will finance its offer with $3 billion in cash from its balance sheet, with the rest coming from new debt arrangements. Analysts at BB&T Capital Markets wrote in a recent analysis to investors that UPS first proposed buying TNT Express for €8.25 per share in late 2011. The bid was raised to €9 per share in February, when UPS’ pursuit of TNT Express was made public.

Cathy Roberson, a senior analyst at Transport Intelligence, worked at UPS for 10 years, and she said rumblings about an acquisition of TNT have been present for quite a while. When TNT spun off its express division, these rumors intensified. She spoke with Air Cargo World when rumblings about an impending deal between UPS and TNT Express first surfaced; she said that if a deal is ultimately to go through, it will change the dynamic of the worldwide air cargo sector.

“It would be a major acquisition in the airfreight market, overall. The airfreight market has been hurting for quite a while, and we’re all expecting consolidation to occur,” she said in February after UPS’ reported offer had been rejected by TNT.

The consummated deal could present at least one issue, however. Roberson pointed out that the combined company would likely claim a majority of the market in some European countries, triggering European antitrust laws. UPS could then either divest or would have to come up with a new plan for those countries. On the plus side, Roberson said, TNT has a broad South Asian road network, which would certainly give UPS a leg up in the Asian market.